Among the pardons and sentence commutations former President Donald J. Trump issued before he left office, one commutation went to a man serving the longest ever prison term for a white collar crime (835 years), and another went to a man who was known as the “King” of Medicaid fraud. The latter drew the ire of the executive director of the Coalition Against Insurance Fraud.
The 20-year sentence of Philip Esformes was commuted by Trump in December, compelling Matthew J. Smith, Esq., of the Coalition Against Insurance Fraud, to criticize Trump for commuting the sentence of the 52-year-old convicted felon who was “the worst of the worst preying on particularly vulnerable elderly Americans and those with lower incomes through his fraudulent chain of assisted-care facilities in South Florida. Meanwhile Esformes was living the lifestyle of the rich and famous with houses, cars, yachts and exotic travel..all paid for by his insurance fraud scheme. A lifestyle he may well now return to as a free man following his receiving full clemency from his sentence and immediate release from jail,” Smith wrote.
Esformes was inducted into the Coalition’s 2019 Hall of Shame.
What worries Smith is that Trump’s action could have a “devastating” effect on the fight against insurance fraud. The president’s action, Smith said, sends a message that fraud fighters’ years of building a strong case were ultimately “to no avail.”
The most dangerous undercurrent of Trump’s action is “the message of insurance fraud not being that significant a crime or moral issue,” Smith wrote.
With the stroke of a pen, Trump “rebuked” those patients injured by the greed of Esformes, harmed all American taxpayers, rejected the work done by state and federal investigators, overturned the efforts of prosecutors, federal judges and the jurors, all to now let a convicted felon insurance fraudster walk away free.”
According to the Chicago Tribune, Esformes hometown newspaper, he was arrested in 2016 at his Miami estate and charged with a $1.3 billion Medicare and Medicaid fraud scheme that, at the time, the U.S. Justice Department described as the largest single criminal health care fraud case ever brought.
In announcing Trump’s decision, the White House said the clemency was supported by former Attorneys General Edwin Meese and Michael Mukasey, as well as former Deputy Attorney General Larry Thompson, the Tribune reported.
The appeal of his conviction alleges massive overreach by overzealous prosecutors who used illegally gathered evidence at trial that violated the attorney-client privilege. The statement by the White House press secretary noted that Esformes has been devoted to prayer and repentance while in prison and his health is declining.
The Chicago Tribune began covering Esformes more than a decade ago when he, his father and a business partner controlled a network of more than two dozen health care facilities located in Chicago and Miami.
Allegations of fraud and neglect piled up in Chicago and Miami, and a whistleblower lawsuit in 2010 alleged that the giant pharmaceutical firm Omnicare Inc. paid millions in kickbacks to secure long-term contracts with Esformes-owned facilities. The Tribune found that families had filed 20 wrongful death lawsuits over a four-year period against seven of his facilities in Miami-Dade County. In one case, a patient allegedly was attacked by a fellow resident, then sent to another Esformes-owned facility, where he suffered a catastrophic fall and died of a brain injury.
In his indictment, prosecutors alleged Esformes and Miami co-conspirators bilked the federal programs for 14 years by cycling about 14,000 patients through various facilities, where many received unnecessary or harmful treatments. Drug addicts were allegedly lured to the facilities with promise of narcotics, and prosecutors said some received OxyContin and fentanyl without a physician’s order to get them to stay.
As part of the kickbacks exchanged between Esformes and corrupt medical professionals, prosecutors contended that “high-end escorts” were flown to Orlando and chauffeured in limousines for liaisons with Esformes at the Ritz-Carlton Hotel, the Tribune reported.
One count of the indictment accuses Esformes of using $300,000 in stolen proceeds to bribe the head men’s basketball coach at the University of Pennsylvania to admit Esformes’s son to the school, according to the Tribune. The coach pled guilty to money laundering and testified against Esformes at the Miami trial.
A jury convicted Esformes of 20 charges of bribery, kickbacks and money laundering, but was unable to reach a verdict on the count of conspiring to defraud the Medicare program.
Prosecutors requested a prison sentence of 30 years for Esformes, but the judge said he was taking into account his history of helping people in need. The judge disagreed with prosecutors’ $550 million estimate of the government’s loss; instead the judge said the loss was between $4.9 million and $8.3 million, according to the Miami Herald. Esformes was sentenced in 2019.
Attorneys for Esformes described him as a philanthropist who had donated more than $15 million to synagogues, schools and needy individuals, often anonymously, the Tribune reported.
Sholam Weiss – 845 years
In January, Trump commuted former New York businessman Sholam Weiss’s 835-year sentence, reduced from 845 years in 2009, possibly the longest ever imposed for a white-collar crime. Weiss would have been due for release in 2754. Compare his sentence to Bernie Madoff’s 150-year sentence.
The 66-year-old Weiss was sentenced in 2000 in Orlando, Florida, after he was convicted on charges related to the collapse in 1994 of National Heritage Life Insurance Company. The Orlando company’s failure cost many of its 35,000 customers their life savings, prosecutors alleged.
In addition to the prison sentence, the judgment against Weiss included restitution of $125,016,656, a fine of $123,399,910 and forfeiture of money and property.
Sources reveal that Weiss was never an employee of National Heritage, but the life insurer entered into an agreement with Weiss in 1993 whereby Weiss would invest National Heritage money for the benefit of the company. Weiss received about $100 million and bought $177 million face value of non-performing mortgages for roughly $87 million. The mortgages were mostly FDIC insured.
Fifteen business executives and lawyers either pled guilty or received immunity for their testimony. None of the co-defendants ended up receiving prison sentences of more than 13 years, according to sources.
At the time of Weiss’s indictment, prosecutors alleged that when regulators took control of the company, National Heritage Life had red ink of approximately $450 million, but others argue that the $450 million is the sum total of the company’s liabilities. It is notable that the Delaware Court of Chancery that granted the company’s liquidation said that National Heritage’s liabilities exceeded its assets by $214 million.
Weiss disappeared after his nine-month trial but before the jury started deliberating. He was found guilty of all counts related to the $125 million, the amount of the restitution order, and sentenced in absentia.
According to news sources, Weiss settled in Brazil and traveled to Israel, Belgium and the United Kingdom. Investigators tracked him into Austria, where he was captured in October 2000. He was a shadow of the 260-pound man they sought. He had lost 50 pounds, shaved his beard and had documents that identified him as Charles Dick.
An Austrian appeals panel initially refused to extradite him, saying he should be tried in Austria, according to news sources. Months later, the panel did an about face and determined that extradition was no longer contrary to human rights.
As Investment News described it, attorneys for Weiss said the panel reversed itself because U.S. federal prosecutors assured Austrian authorities that Weiss would be re-sentenced and allowed a full appeal.
Once Weiss was returned to the U.S., prosecutors said there never was a formal agreement that Weiss would be re-sentenced, just a suggestion of that in the diplomatic back-and-forth. An assistant U.S. Attorney is quoted as saying Weiss was trying to use his flight from justice as “a sword to escape punishment for his extraordinarily serious criminal offenses.”
The assistant U.S. Attorney argued in a federal court in Atlanta in 2010 that the re-sentencing is not enforceable.
According to a press release issued in 2013 by the U.S. Attorney’s Office of the Middle District of Florida, the U.S. Court of Appeals for the Eleventh Circuit upheld Weiss’s 1999 conviction on 78 counts of racketeering, wire fraud, interstate transportation of stolen funds, money laundering and other offenses related to defrauding National Heritage Life. Sometime after Weiss was extradited to the U.S. in 2002, the district court vacated one count of obstruction of justice from his conviction and reduced his prison sentence to 835 years.
The evidence at trial established that Weiss had been instrumental in causing a loss by National Heritage Life of more than $125 million and had worked with company insiders to hide those losses from company executives and state insurance regulators, while “enriching himself with the company’s assets,” the news release states.
Weiss argued on appeal that his conviction should be vacated because, at the time of his trial, prosecutors had served a subpoena on one of his attorneys, thereby disqualifying the attorney from representing him at trial.
As described by the news release, after hearing the argument, the appeals court held that “there is no evidence that the government acted in bad faith when it subpoenaed the attorney’s testimony.” The court said that the attorney could not have represented Weiss at trial anyway because Weiss had created a conflict of interest; he had used the attorney to submit documents and recordings to investigators, and those documents, unbeknown to the attorney, were fraudulent. The court also rejected Weiss’s argument that the district court had erred when instructing the jury on the wire fraud counts of the indictment.
In commuting Weiss’s sentence, Trump noted that Weiss currently suffers from “chronic health conditions.”
Weiss supporters have argued that Weiss was unfairly penalized because he went to trial contesting the charges instead of making a plea deal with prosecutors. A news source indicated that Weiss was offered a deal for a five-year prison term. Indeed, news sources point out that the National Association of Criminal Defense Lawyers included Weiss in a set of clemency petitions it submitted to the White House in October, alongside a number of prisoners sentenced for nonviolent drug crimes.
Apparently, Weiss made his case worse when he fled the U.S. while he was free on bail.
In addition to getting support from his 26-year-old nephew, who reportedly bombarded Trump with tweets and emailed New York state legislators, Weiss hired a lobbyist to make his case to Trump and had support from a former U.S. Attorney General, former U.S. Solicitor General and a Harvard Law School professor, among others.
One source cites a letter from the Austrian Chancellor to Trump saying that under Austrian law, Weiss would have received no more than a 10-year sentence. He has already served 18 years.
As it turns out, according to medium.com, National Heritage Life didn’t actually lose any money. Restitution was satisfied with the proceeds of the mortgages that Weiss bought. The receivers settled the mortgages and collected full face value of the mortgages, realizing a profit for the insurer.
Sources report that three weeks after Weiss was sentenced the receivers had retrieved between $175 million and $200 million, and 16 years later, the government filed a satisfaction of restitution.