‘Fleecing the system’: Ted Cain, wife defrauded Medicare of more than $10 million, jury finds
South Mississippi businessman Ted Cain and his wife, Julie, defrauded Medicare of more than $10 million by charging Stone County Hospital for work they never did, a jury found Thursday evening at the end of an eight-week civil trial.
Ted Cain owns the hospital and a dozen other South Mississippi businesses, including The Focus Group advertising firm in Biloxi and Cain Cattle Co. in Wiggins, where he was born and raised.
The Cains can continue doing business, but are not allowed to transfer any assets before court reconvenes at 10 a.m. March 26 in Gulfport. Presiding federal Judge Henry T. Wingate will hear arguments on tripling the damages the Cains and other defendants will owe. The federal whistle-blower law under which they were tried calls for those damages.
The nine-person civil jury also found Tommy Kuluz, chief financial officer of Cain’s Corporate Management Inc. in Gulfport, liable for almost $9.9 million in Medicare fraud. Kuluz was responsible for completing 11 of 12 Medicare cost reports submitted to reimburse Ted and Julie Cain’s hospital pay from 2004-2015.
Starann Lamier, CMI’s former chief operating officer, was the only one of the six defendants cleared in the case. Tears streamed down Lamier’s face as the jury’s findings were announced. She signed only one of the annual Medicare reports, saying it was late in the day and nobody else was available.
The trial was aimed at recovering Medicare’s money, plus damages and fines. The defendants did not face criminal charges or the possibility of prison time.
The jury also found CMI liable for Medicare fraud in the same amount as Ted Cain — $10,855,382. Julie Cain and Stone County Hospital were liable for $10,473,516 of the fraud, also for submitting the Medicare reports that reimbursed salaries for the Cains.
The hospital and Julie Cain owe less because only Ted Cain, Kuluz and CMI were found liable for $381,866 in costs they allocated to Medicare while disallowing that amount from Medicaid reporting. Kuluz’s liability excluded the one annual cost report that Lamier had signed.
Former Gov. Ronnie Musgrove said the defendants will appeal the verdict. In a statement emailed to the Sun Herald, Musgrove wrote:
“Despite the outcome, Ted and Julie are still proud of the investment they made into bringing quality healthcare to Stone County and Ted’s home town of Wiggins. They would do it again, and they are proud of what they accomplished for the community.”
The case started 13 years ago, he pointed out, when whistleblower James Aldridge filed his lawsuit under seal after working for about two months as chief operating officer at the hospital.
The U.S. Justice Department and U.S. Attorney’s Office for the Southern District of Mississippi teamed up to try the defendants after an investigation that lasted more than eight years. They were joined by Aldridge’s attorney, John Hawkins of Jackson.
Musgrove referred to Aldridge, who did not testify during the trial, as a “disgruntled former employee.”
Hawkins saw it differently.
“They were fleecing the system,” Hawkins said. “This shows us the power of the jury system. They spoke today on behalf of the community.
“Juries keep us from being run over roughshod by greedy individuals and corporations and keep us from being fleeced like sheep. It’s not OK to suck over $15 million out of the Medicare program for little to no work done for patient care. This type of abuse cannot be tolerated, so I hope other people take notice.”
Under the federal whistle-blower law, Hawkins said, Aldridge should recover from 15% to 25% of the damages.
The jury found no liability for depreciation Ted Cain charged Medicare on a BMW automobile he drove. They also did not agree with the government’s contention that the defendants charged Medicare for expenses CMI incurred running other Cain companies.
Ted Cain’s face reddened as the verdict was announced against him, while Julie Cain sat forward in her chair. The serious expressions on their faces did not change during the hour it took to read the verdict, which was 28 pages long and went through each of the Medicare cost reporting years for each defendant.
Ted Cain paid himself a total of $15.2 million over the years as CEO of the 25-bed rural hospital, charging his management fee through CMI. Julie Cain was paid a total of $2.3 million as hospital administrator.
Yet Cain could produce little documentation showing the work he did and testimony indicated Julie Cain was often away from the hospital. Both Cains claimed they worked hard to revive the hospital, which Cain bought in 2001 after it had closed three times.
The Stone County hospital is currently being run by Gulfport Memorial Hospital under a lease agreement with the Cain company that owns the land. The government is seeking to recover a portion of its judgment against the Cains by garnishing those lease payments.
This story was originally published March 13, 2020 at 9:43 AM.
