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Connecticut resident Erin Verespy, of Trumbull in Fairfield County, was sentenced to 66 months in prison for her role in a $33 million scheme to misappropriate client healthcare funds and defraud multiple lenders through her role as the Chief Financial Officer of Employee Benefit Solutions (EBS), an insurance firm in Wilton.
In addition to her prison sentence, Verespy was also ordered to pay $16,053,508.19 in restitution and to forfeit $1,066,038.02 as part of her guilty plea for wire and bank fraud violations.
US Attorney Damian Williams said that EBS provided third-party healthcare claims administration services to clients that elected to “self-fund” or self-insure their employee healthcare plans.
In that role, EBS would purportedly administer, process, and pay healthcare claims for its clients’ employees in exchange for an administrative fee.
Between 2015 and 2019, EBS generated bimonthly “check register” invoices for an auto dealership in Westchester - which has not been specified by federal investigators - that listed all employee healthcare expenses from healthcare providers during that two-week period.
In reality, a significant amount of purported checks listed on the EBS “check register” invoices were never actually deposited by the healthcare providers.
Instead, approximately $17.87 million in the Westchester dealership's healthcare payments were misappropriated, with the majority simply transferred by EBS into its own operating account, where they were used for non-healthcare expenses by the defendants.
Prosecutors said that in an effort to conceal their fraud from the owners and bookkeepers at the auto dealership, the four took steps by creating and sending manipulated and fabricated bank statements and checks to create the appearance that healthcare claims were being paid by EBS, when in reality they were not.
Williams said that Verespy personally made more than $1 million from her participation in the scheme.
The “check registers” sent to the Westchester dealership contained millions of dollars in fraudulent or inflated healthcare claims that were eventually paid by the company, prosecutors said. EBS routinely inflated check registers at the direction of Verespy and others, including through the Westchester business.
Such efforts were typically accomplished through Verespy instructing others to manually create fraudulent entries in the EBS claims processing software, including fake claims under the name of a business controlled.
Verespy and her co-conspirators also took steps to conceal their fraud from the Westchester dealership by creating and sending manipulated and fabricated bank statements and checks to create the appearance that healthcare claims were being paid by EBS, when in reality they were not.
By the middle of 2017, as EBS buckled under mounting outstanding fiduciary obligations, Verespy and the others began an elaborate effort to conceal and perpetuate the ongoing fraud to the Westchester company by applying for multiple fraudulent bank loans and merchant cash advances designed in part to pay various fiduciary obligations that EBS owed.
They then fraudulently applied for and received millions of dollars in loans under the auspices of financing the purchase of upgraded billing software for EBS, which included Verespy and her co-conspirators submitting fabricated invoices from a fake company that supposedly sold the billing software.
“For nearly two years, Erin Verespy helped manage a sophisticated, widespread scheme to steal millions of dollars of client healthcare funds, including with false and inflated invoices,” Williams said. "As part of that scheme, Verespy also defrauded lenders out of millions. In doing so, she abused a position of trust as a fiduciary of client money that was meant to pay for important healthcare expenses.
"Thanks to the coordinated and tireless efforts of our law enforcement partners to untangle this fraud, Verespy will now serve a significant sentence in federal prison.”
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