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Cardwell conspirator apologizes for fraud scheme

Before being sentenced for helping Paul Cardwell defraud hospitals in Powell and White County, Ind., out of nearly $1.69 million, Michael J. Plake apologized.

“I’ve waited a long time to be able to say this publicly,” Plake said at the May 6 hearing. “But I want to say to the people of Powell, White County and HealthTech (which manages Powell Valley Healthcare) how deeply sorry I am for the pain that I’ve caused by contributing to the crimes perpetuated against you. Again, this is a sorrow that not only comes from the bottom of my heart, this is based on the realization of the damage that my actions have caused.

“I do not expect that you will ever forgive me, but I beg it regardless,” the 48-year-old said, choking up. “And know that I remain committed as always to doing everything in my power that is legal, moral and ethical, to repay the damage that I’ve done.”

Plake, of West Lafayette, Ind., said he had no excuse for his actions and that he’d failed to follow the virtues he’s taught his children and other youth.

“I messed up and I messed up big,” he said.

Plake and several of his family members asked Chief U.S. District Court Judge Nancy D. Freudenthal in Cheyenne to sentence the former band director and Catholic youth minister to probation. They said that would allow Plake — a devoted father, husband and son — to stay with his family and immediately begin paying back what he helped Cardwell steal. However, the U.S. Attorney’s Office — along with officials from Powell Valley Healthcare and HealthTech Management Services — said justice demanded prison time for Plake’s role in the scheme that stretched from 2003 to 2011.

“We have a real kind of ‘two worlds’ situation here,” said Judge Freudenthal, after listening to an hour and a half of testimony and arguments. “We have a family man who is loving and thoughtful, kind and considerate, who’s contributed to his community and been an educator in his life and has supported not only his immediate or extended family, but others in the community as well in times of trouble.

“And we have another world of nearly a decade of deceit,” Freudenthal said. “And that’s really all I can call it is deceit.”

The judge agreed with the prosecutor’s recommendation and imposed a 30-month prison sentence.

The crime

Plake said the genesis of the fraudulent billing scheme came in either 2002 or 2003. That was when Cardwell — a high school friend and then the CEO of White County Memorial Hospital in Monticello, Ind. — approached Plake about forming a business called Plake and Associates.

“The purpose of this business was to be represented as though it was doing recruiting work (for the hospital) that I in fact never did, and recruiting work that I had no proof or any substantial reason to believe Paul Cardwell had ever done,” Plake said.

After taking in a total of $845,820.77 from White County, the scheme went on hiatus when Cardwell retired in 2009. However, Cardwell came out of retirement to become head of Powell Valley Healthcare and revived the scam with Plake.

Through payments to Plake and Associates, the two men defrauded the Powell hospital out of $847,884 between March and September 2011.

The scheme ended for good when auditors and officials with Powell Valley Healthcare and HealthTech, the hospital’s management company, caught on. Cardwell resigned as CEO on Sept. 23, 2011.

Investigators with HealthTech and the federal government say Cardwell generally ran the scheme, with Plake just processing the money.

However, HealthTech’s general counsel, Brenda Philips, said Plake did try to cover his tracks.

On a Sept. 24, 2011 phone call, “he falsely represented Plake and Associates to be a bona fide physician recruiting company and told me that in prior years he had recruited only six to seven physicians per year but that during 2011 his business had ‘exploded,’” Phillips recounted in a court filing. Plake also emailed bogus recruiting agreements.

Plake later fully cooperated with authorities in the criminal investigation. He even tipped off investigators that he and Cardwell had run the scheme earlier in White County — something officials in Indiana had been unaware of.

Family stands by Plake

Based on the crime and the amount of money stolen — versus Plake’s cooperation and lack of any prior criminal history — federal sentencing guidelines spelled a sentence between 41 and 51 months. However, Assistant U.S. Attorney Lisa Leschuck asked for a reduction to 30 months because of Plake’s extensive cooperation.

Plake’s defense attorney, Sean Barrett of Cheyenne, asked instead for probation — a request Barrett said he’d never made in federal court. Barrett described Plake as truly sorry, eager to begin making restitution payments and as already having been punished.

In letters and testimony, Plake’s friends, former coworkers and family described a kind, caring and helpful man.

His mother-in-law, Joyce Illingworth, said she’s “always found Michael to be honest and he speaks from the heart. He is not perfect, but who among us can say that they are?”

Plake’s family also talked about the impact the case has had on them.

“Both girls have been bullied at school as a result of the media’s portrayal of Michael and not knowing the extensiveness of this case and also the role that Paul Cardwell had in this case,” said Kim Plake, Michael’s wife. “So basically Paul (Cardwell) has fled, Michael has suffered through everything, has been a man, stood up, been accountable for his actions and we have suffered as a result.”

Cardwell pleaded not guilty to the charges last year, but — while free on a $50,000 unsecured bond — disappeared in late August 2012. The fugitive’s whereabouts remain unknown.

“I don’t believe (Michael) really intentionally meant for this to happen — and I don’t mean being caught, I just mean the whole thing,” Kim Plake said, describing her husband’s trusting nature as his downfall. “He trusted Paul (Cardwell) as a result of his friendship and he made some poor decisions as a result of that.”

Judge Freudenthal respectfully but specifically rejected that perspective in imposing the sentence.

“For nearly 10 years in two institutions, this isn’t a crime that someone unwittingly participates in because of a trusting personality,” said Freudenthal, adding, “It’s hard for me to see someone who, based upon the nature of the offense, can really only be considered a manipulator and a liar and reconcile that with heartfelt positive comments from such a wonderful family.”

The judge added that she was proud of Plake for not shaming his family and community “as Mr. Cardwell did by fleeing,” for his cooperation and his unequivocal acceptance of responsibility in court last week.

In choosing to impose prison time, Freudenthal cited the seriousness of the crime, how long it lasted and the damage done.

‘Justice does deserve a punishment’

“It’s sad and it’s just a sad day for most everybody in this courtroom, but justice does deserve a punishment in this case,” said Leschuck, the prosecutor. “And a total of $1.69 million over an eight-year period cannot simply be ignored by saying, ‘We’ll let you slide on this one.’”

HealthTech president Neil Todhunter said the fraud would have continued if his company hadn’t discovered it. Todhunter said his Franklin, Tenn.-based company spent more than $500,000 and many man-hours on the investigation. He also said it’s had a negative impact on the company’s reputation and on current and prospective clients — most specifically Powell Valley Healthcare.

Current Powell hospital CEO Bill Patten described the relationship between the two entities as having nearly broken before being mended.

In addition to the financial losses, Patten described the difficulty he’s had as Cardwell’s successor in earning the trust of the hospital’s board; lingering dischord in the organization; the challenge of recruiting staff with the negative publicity; and time spent dealing with the fallout.

“I regret the impact this situation must be having on their families, but I also believe that justice must be done,” Patten told the court. “My community needs it. The employees of Powell Valley Healthcare need it.

“Mr. Plake has admitted to his guilt and I urge you not to impose a slap on the wrist, but rather a sentence that reflects the seriousness of the offense that he has committed,” he said.

Dollars recovered, trust not

Judge Freudenthal said for a service sector business like health care, reputation is their most valuable asset.

While the dollar amount is “staggering,” Freudenthal said “the damage is just not a damage to their bottom line, it’s a damage to an asset: a reputational asset, a trust asset, a competency asset.”

Although the institutions are working hard to restore those losses, Freudenthal said many in the communities will never regain their trust in the hospitals.

“And that weighs heavy in my view of the seriousness of this crime,” she said.

Plake has said his share was about 25 percent of the money, with Cardwell getting the other 75 percent. The rough math, then, says Plake pocketed about $422,000 and Cardwell $1,267,000. Despite the fact that Cardwell reportedly made off with three times as much money, Plake is on the hook for everything unless Cardwell turns up.

The restitution plan requires Plake to pay $500 a month or half his monthly income, whichever is greater. At even $1,000 a month, it would take more than 140 years to repay the full sum.

Plake told the judge he would make payments “until my dying day.”

Powell Valley Healthcare and HealthTech have generally recovered their direct losses from insurance, so their share of the restitution will theoretically go to those insurers.

If Cardwell was to be caught within the next year and Plake testifies against him, Plake would likely become eligible for a shorter prison sentence. Plake continues to remain free on a $50,000 unsecured bond, set to begin serving his prison sentence on June 21 at an Indiana facility.

1 comment

  • posted by Mike Wison

    May 18, 2013 4:29 pm

    What happened to moving Powell Valley Healthcare forward through incredibly innovative ideas gathered at the Strategic Planning as wrote about a few weeks ago? By the way-none of those ideas were unique and all have been presented over and over again throughout the last decade of Strategic Planning at PVHC-get some new ideas. Sounds to me like Patten keeps making excuses so it is not all his fault PVHC is still in a mess when he leaves. Powell Tribune doesn't print my other comments so figure no one will see this one either.

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