Louisiana Couple Pleads Guilty For Their Roles in $48 Million Fraudulent Medical Reimbursement Program

by Andrew Murray | June 26th, 2019

On June 19, 2019, the Department of Justice announced the entry of guilty pleas by a Louisiana couple and their business for charges related to a fraudulent medical reimbursement program. The press release states:

A Covington, Louisiana, couple and their company pleaded guilty for their roles in a scheme to create, market and operate a fraudulent medical reimbursement program that defrauded the IRS and program participants out of over $48 million.

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Denis Joachim, 53, pleaded guilty to one count of conspiracy to commit money laundering; Donna Joachim, 52, pleaded guilty to one count of conspiracy to defraud the United States; and The Total Financial Group, Inc. (TTFG) pleaded guilty to one count of conspiracy to make false statements and representations in connection with a multiple employer welfare arrangement and five counts of making false statements and representations in connection with a multiple employer welfare arrangement.  All the pleas took place before U.S. District Judge Carl J. Barbier of the Eastern District of Louisiana on May 30, 2019, and were unsealed yesterday.  Sentencings have been scheduled for Sept. 5, 2019, before Judge Barbier.  As part of their guilty pleas, the defendants have agreed to forfeit assets previously seized with a collective value of approximately $6.3 million.  Additionally, the defendants acknowledged a potential loss to the victims totaling more than $48 million and agreed to repay restitution for the amount of loss.

According to admissions made as part of the guilty pleas, TTFG was a Louisiana business incorporated by Denis Joachim and Donna Joachim with the Louisiana Secretary of State that was most recently located at 406 N. Florida Street in Covington.  TTFG and its owners created and marketed a medical reimbursement account program called “Classic 105,” which operated from about 2012 until January 2017.  Classic 105 claimed to be a multiple employer welfare arrangement that was marketed to employers as a supplemental benefits plan for their employees to reimburse for medical expenses such as co-pays and deductibles; participants in Classic 105 were required to have a primary health insurance plan unrelated to and in addition to Classic 105.

According to the defendants’ admissions, Classic 105 claimed to be comprised of several components:  a tax-exempt contribution of between $1,000 and $1,600 per month made by an employee (which reduced the employee’s taxable income), a loan from a financial institution back to the employee to make up for the contribution, an insurance policy payable to the lender at the employee’s death to repay the loan and fees paid by the employee and the employer directly to TTFG.  TTFG told prospective employer-clients that participants would never have to make out-of-pocket payments to repay the loan and that as a result of the tax savings, most participants would receive an increase in their net take home pay.  TTFG also told prospective employer-clients that the contributions would be stored in a unique account for each employee-participant and that any money not used by the end of each calendar year would revert to TTFG.  TTFG also charged employee-participants a fee of between $150 and $250 per month and the employer a fee of five percent of each employee’s contribution amount.  At its peak, over 350 employer-clients and 4,400 employee-participants nationwide were enrolled in TTFG’s Classic 105 program. In total, TTFG took in not less than at least $25,543,340.70 in fees from the employer-clients and employee-participants, the defendants admitted.

According to the defendants’ admissions, TTFG never obtained a single loan or insurance policy for the Classic 105 program, and participants never made any actual contributions.  Rather, TTFG arranged for the contribution, loan and insurance policy to appear as a series of “paper transactions” that, in effect, did nothing more than reduce participants’ taxable wages and employers’ FICA payments improperly, without their knowledge of the impropriety.  Consequently, TTFG and the Joachims admittedly caused the underpayment of at least $23,343,442.70 in federal FICA taxes, as well as the underreporting and underpayment of personal federal income taxes, federal unemployment taxes and state unemployment taxes—amounts for which the employer-clients and employee-participants may be individually responsible.  It also exposed participants to other adverse financial consequences, including fees and penalties on the unpaid tax and ineligibility from certain government programs, including unemployment payments and reduced Social Security payments, the defendants admitted.

In truth, the only money actually paid to TTFG were the fees, which the Joachims used to make numerous personal expenses, including the purchase of a 26-foot boat, a 2016 Grand Design Solitude recreational trailer, a Chevrolet Corvette, a Jeep Wrangler, a Dodge Ram truck, a Mercedes-Benz CL 550 automobile, a GMC Yukon XL Denali, multiple CAN-AM Maverick 1000R off-road vehicles, jet skis, their 13,000 square foot Covington residence, real property located adjacent to their Covington residence, two residences located in Madisonville, Louisiana, 40 acres of property in Bush, Louisiana, and 125 acres of property in Spring City, Tennessee, the defendants admitted.

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