A Maryland insurance broker, indicted last month for allegedly stealing $216,000 from the City of Perth Amboy, N.J., is now facing a second indictment, accusing him of conspiring to steal more than $2.5 million from the Perth Amboy Board of Education by submitting fraudulent claims.

Paula. T. Dow

Francis X. Gartland, two of his companies and a second broker from Summit, N.J., were indicted in connection with the alleged conspiracy, according to New Jersey Attorney General Paula T. Dow and Criminal Justice Director Stephen J. Taylor.

Officials said the investigation into alleged fraud and corruption in insurance contracts for a number of municipalities continues.

In June, Gartland, his son-in-law and a business partner from Maryland, and their companies, were accused in the first indictment with stealing $216,495 from the City of Perth Amboy by collecting payments for a non-existent “wellness program” for city employees.

In the new indictment, a grand jury charges Gartland, 69, of Baltimore, Md.; Brian Foley, 36, of Summit, N.J.; and Gartland’s companies Gartland and Co. (GAC) and E-Administrative Systems (EAS) with first-degree conspiracy, first-degree money laundering, second-degree money laundering (structuring), second-degree theft by deception, second-degree making false representations for a government contract, fourth-degree falsifying or tampering with records and fourth-degree forgery.

Gartland also is charged with misconduct by a corporate official in the second degree. “We allege that these insurance brokers systematically stole more than $2.5 million from the Perth Amboy School District through a fraudulent scheme in which the district was billed for services for employees that were never provided or authorized,” Dow said in a statement.

Taylor said Gartland was “exploiting his position as an insurance broker for public entities to steal very large sums of money.”

Prosecutors say GAC was the broker of record for health benefits insurance for the Perth Amboy Board of Education (PABOE) and was authorized to act on the PABOE’s behalf with its medical insurance carrier. Between November 2003 and July 2009, the defendants and an unnamed co-conspirator allegedly conspired to fraudulently obtain $2,593,400 from the PABOE by charging it for nonexistent or unauthorized healthcare related programs and services, including wellness programs and employee assistance programs.

Foley and the unnamed co-conspirator, worked for an unnamed insurance brokerage firm where the co-conspirator was the co-broker of record for the PABOE and was also authorized to act on its behalf with the insurance carrier, according to the indictment. The defendants alleged used GAC’s position as broker of record for the PABOE and the other firm’s position as co-broker of record to authorize or cause to be authorized payments to GAC and EAS for the nonexistent or unauthorized programs and services, prosecutors said.

The indictments says the defendants falsely represented to the insurance carrier that the PABOE authorized the insurance carrier to pay fees on behalf of the PABOE from its medical claims bank account for the programs and services. The defendants allegedly submitted fraudulent and forged PABOE authorization letters and fraudulent billing invoices from vendors to the insurance carrier resulting in payments from the PABOE medical claims bank account.

The indictment identifies 15 alleged instances in which checks or payments were received from the insurance carrier by GAC and EAS as a result of fraudulent billing. They included payments of $341,400, $391,000, $436,000, $465,000, $480,000, as well as nine payments of $40,000 each and one payment of $120,000 ($480,000 total). The indictment alleges that the funds were deposited into the bank accounts of GAC, EAS and the defendants subsequently disbursed payments from those accounts to benefit themselves and others.

Gartland allegedly issued checks to himself from the GAC and EAS accounts. In disbursing funds for the benefit of the others involved in the conspiracy from GAC and EAS accounts, Gartland allegedly concealed the fact that the funds were disbursed for their benefit in various ways, including, for example, by directly paying the personal bills of the unnamed co-conspirator and by issuing checks to Foley’s wife in her maiden name, according to the indictment.

The defendants allegedly engaged in transactions designed to conceal or disguise the source, ownership and control of the funds obtained by fraud. In transactions with banks involving the fraudulently obtained funds, they deliberately broke down the funds into amounts small enough to evade state and federal currency transaction reporting requirements, according to prosecutors.

First-degree charges carry a maximum sentence of 20 years in state prison, while second-degree charges carry a maximum sentence of 10 years in state prison. Fourth-degree charges carry a maximum sentence of 18 months in prison.

The defendants also face fines of up to $5,186,800 for the individual defendants, and fines of up to $15,560,400 for the corporate defendants. In addition, a $2,880,000 public corruption profiteering penalty would also apply. The money laundering charges carry an additional anti-money laundering profiteering penalty of up to $7,780,200 for the first-degree offense and up to $551,400 for the second-degree offense.