Cauthen Cooperating with Feds
NASHVILLE, TENN. – More than a year after she was originally charged, former Blythewood Town Councilwoman Kathleen (Katie) Devereaux Cauthen is still waiting for her day in court for her alleged part in a $28 million health care fraud.
Cauthen has been charged with two felony counts in a U.S. District Court in Nashville, Tenn. The charges include conspiracy to commit “theft or embezzlement in connection with health care” and misprision, the failure to report the commission of a felony to judicial authorities. Cauthen, who was a member of the South Carolina Bar until her license to practice law in South Carolina was suspended last year, faces a maximum sentence of eight years in prison and $500,000 in fines if convicted of the two charges.
Cauthen’s case has been delayed on multiple occasions as she has been helping the U.S. Attorney’s Office make a case against her co-conspirators. However, documents filed in her case, and that of others charged in the scheme, state she could plead guilty soon.
“The Defendant (Cauthen) has been and continues to cooperate with the Government in its investigation of other individuals,” Cynthia C. Chappell, Cauthen’s appointed attorney stated in court documents. “The trial of related defendants was continued some time ago and has not been rescheduled. Based on the foregoing, the parties submit that the ends of justice would be best served by continuing Ms. Cauthen’s plea hearing and, therefore request that the Court continue this matter to a convenient date for the Court in or around August 2015.”
Four of Cauthen’s alleged co-conspirators – William Worthy of Isle of Palms; Bart and Angela Posey of Springfield, Tenn. and Richard H. Bachman of Austin, Texas – were indicted by a federal grand jury in Nashville in June 2013. That case was scheduled for trial in U. S. District Court in Nashville in January 2015, but has been moved up and now is unlikely to see a jury until August 2016. Some of those charged in this case are also cooperating with the U.S. Attorney’s Office and so are likely to accept a guilty plea and not go to trial. According to U.S. Department of Justice statistics, more than 95 percent of federal criminal defendants plead guilty to charges.
Filed June 16, 2014, the former Councilwoman is alleged to have aided others in a scheme purported to provide health care benefit coverage to more than 17,000 individuals and multiple employer groups in various states. It claims that although holding themselves out as providing health care coverage, the defendant and her co-conspirators did not comply with either state or federal regulatory requirements. Cauthen and her co-conspirators are alleged to have collected more than $28 million in insurance premium payments.
Some of those premiums went into an account opened by Cauthen at First Citizens Bank in Blythewood in the name of Nationwide Administrators for which Cauthen listed herself as president and used her home address for the company’s physical address according to the federal charges. This action is the basis of the misprison charge.
“The funds deposited into the account at First Citizens Bank were intended to represent payments to a non-existent underwriter, but were instead primarily converted to the personal use of defendant Kathleen Devereaux Cauthen and co-conspirator William M. Worthy II,” according to the information.
On July 10, 2014 Cauthen waived her right to be indicted on the charges, and instead she was charged in a federal criminal information – a formal criminal charge made by a prosecutor without obtaining a grand jury indictment. In the document, Cauthen consented to prosecution by information, a path normally taken by individuals who implicate themselves and cooperate with the U.S. Attorney’s Office. This cooperation, if it is substantial, provides original information to the prosecution and if honest, can lead to a federal court reducing the offense level of the crime and so reducing the sentence.