Kathleen “Katie” Devereaux Cauthen, 46, has pleaded guilty and was scheduled to be sentenced Aug. 26 on two felony counts – 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. However, Cauthen’s sentencing hearing, where she could face 21-27 months in federal prison, has been delayed until Feb. 12, 2018 as she continues to help prosecute her alleged co-conspirators in a related case.
According to court documents released Aug. 8, Cauthen’s cooperation could culminate in the trial of Bart and Angela Posey, both 48, of Springfield, Tenn. and Richard H. Bachman, 67, of Austin, Texas. That case, titled USA Vs Posey, focusses on the same conspiracy and on which she is an unindicted co-conspirator, will go to trial in Jan. 16, 2018. The extension of time in this case, which is officially labeled as “complex” is “due to the nature of the prosecution, type of charges, and scope of discovery and forfeiture proceedings” Cauthen’s attorney Cynthia Chappell wrote in her motion asking to delay sentencing. This order was granted without opposition from prosecutor, Assistant United States Attorney William Abely.
Cauthen’s charges, filed June 16, 2014, state that she aided others in a scheme purported to provide healthcare benefit coverage to more than 17,000 individuals and multiple employer groups in various states.
The Posey case was filed a year before Cauthen was charged in June of 2013. Defendant Worthy, 53, of Isle of Palms, has also pleaded guilty, admitting one count of conspiracy and one count of wire fraud, for which he was sentenced earlier this year to serve 82 months in a minimum security prison and to pay $6.5 million in restitution.
At his 2015 plea hearing, Worthy admitted participating in a scheme designed to defraud thousands of individuals who purchased purported healthcare coverage from him and his co-conspirators. Worthy acknowledged his role in promoting and selling the health care plans not backed by insurance companies, which were marketed by Smart Data Solutions, LLC, a company located in Springfield, Tenn. owned and managed by Bart Posey, who is charged as a co-conspirator in this case. Worthy also admitted that he and his co-conspirators embezzled funds from premiums paid by individuals who had signed up for these unauthorized health plans, diverting more than $5.4 million in premiums for their own personal use. He further admitted that the majority of claims submitted in connection with these unauthorized health plans were never paid and accepted responsibility for more than $7.3 million of losses from the fraud.
Bart Posey, the named defendant in the case, faces 57 counts including criminal conspiracy, mail fraud, wire fraud, embezzlement and money laundering. Angela Posey and Bachman face almost all of those charges, also.
Cauthen will be hoping to qualify for a “downward departure” with her cooperation. If a defendant is able to offer substantial assistance in the prosecution of others, their sentence can be reduced in the federal sentencing guidelines.
Request for comment from the U.S. Attorney’s office were not returned at time of publication.