Point Reyes Light - October 7, 2004
Feds convict Stinson man of fraud, money laundering
By Jacob Resneck
A Stinson Beach man faces federal prison and will probably lose his house after pleading guilty last Thursday to nine counts of mail fraud, one count of healthcare fraud, and 52 counts of money laundering.
During a federal court hearing in San Francisco, John Hyde, 64, president of the Novato-based Interstate Services Inc., admitted scamming his customers out of thousands of dollars through the sale of fraudulent health-insurance plans.
‘Illegally diverted funds’
In pleading guilty, Hyde admitted that between 1997 and 1998, he sold health plans that he had falsely represented as compliant under the Employee Retirement Income Security Act. In those years, Hyde marketed the health plan throughout the country, which his customers thought was a legitimate health plan but was essentially worthless.
Hyde had promised his customers that 30 percent of the premiums would go into trust accounts, while the remaining 70 percent would be used to purchase a group health insurance policy. Instead, Hyde never made some of the promised deposits into trust accounts and some of the monies from the premiums were spent on personal expenses, salaries for family members, luxury goods, football tickets, and commissions to promoters of the racket.
‘Junk plans from Aruba’
The only health plan purchased by Hyde, according to prosecutors, was by an Aruba-based company called Colonnade Insurance, which was not licensed to operate in the US, had no rating, and was less than two years old, rendering the health plans worthless, prosecutors said.
Aruba, a 75-square-mile island just off the coast of Venezuela, is an autonomous country within the Kingdom of the Netherlands.
"Healthcare fraud can have a devastating impact on victims in untenable circumstances by depriving them of health-insurance coverage in their time of need," US Attorney Kevin Ryan commented last week in a written statement.
Prosecutors said that Hyde pled guilty to the 64-count indictment with no prior plea agreement, meaning he cannot expect concessions from the government.
"There was no plea agreement, he is basically at the mercy of the court," said Garrick Lew, Hyde’s attorney.
Hyde will be sentenced at a hearing Jan. 12. The maximum penalty for each count of mail fraud is five years in prison. The maximum penalty for healthcare fraud and money laundering is 10 years in prison on each count. Each count also can carry a fine of up to $250,000. Prosecutors are seeking forfeiture of Hyde’s house in Stinson Beach.
"If you were to add it all up, if the court were to sentence each count to be served consecutively it would total something like 500 years. But that’s highly unlikely," Lew said.
Hyde’s prosecution came after several years of investigation by the IRS’ Criminal Investigation Division, the US Department of Labor, the Employee Benefits Security Administration, and the FBI.
Hyde initially pled not guilty to the 64-count indictment but changed his plea last week. Lew said he would not discuss possible reasons for Hyde’s sudden change in plea, citing attorney-client confidentiality.