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January 29, 2014

Hospital CEO sentenced to 10 years in prison for fraud

Daily Briefing

    A former hospital CEO was sentenced this week to 10 years in prison for defrauding Powell Valley Healthcare in Wyoming and White County Memorial Hospital in Indiana out of more than $1.5 million from 2003 to 2011. 

    Former CEO faces prison time after defrauding two hospitals

    Background on the case

    According to prosecutors, former CEO Paul Cardwell said he was steering hospital funds toward physician recruitment efforts, but the money actually went to Cardwell's childhood friend—Michael Plake—who then kicked back most of the money to Cardwell.

    In testimony given in federal court last October, Cardwell said that the scheme began while he was CEO of White County Memorial. Plake had fallen on hard times and suggested "that physician recruitment could be a good occupation." Cardwell claimed in his testimony that the recruiting idea began "with some legitimacy" in the beginning, but that they then decided to pocket the money.

    Operating under the name "Plake and Associates," the men took in roughly $800,000 between 2003 and Cardwell's retirement from White County Memorial in 2009. Cardwell kept about 75% of the funds, and Plake kept about 25%.

    When Cardwell became CEO of Powell Valley in March 2011, he and Plake reactivated the scheme, taking in $848,000 in just seven months.

    Cardwell and Plake were finally caught when auditors and other officials began questioning the recruiting payments at Powell Valley. FBI investigators later discovered that the two had run a similar scheme at White County Memorial.

    Powell's arrest and sentencing

    Cardwell's trial was delayed by more than one year because he disappeared just three weeks before his trial was scheduled to start in 2012. Cardwell was finally arrested last June in Thailand and extradited to the United States.

    Cardwell claimed he went to Thailand to bring his one-year-old son back to the United States. But during his sentencing on Monday, U.S. District Judge Nancy Freudenthal said Cardwell was simply evading his trial.

    She sentenced Cardwell to pay restitution of nearly $1.7 million and serve 121 months in prison. Freudenthal last year sentenced Plake to 30 months in prison (AP/Modern Healthcare, 1/28 [subscription required]).

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