PROVIDENCE – A federal grand jury has indicted two CVS executives on charges of fraud and bribery, alleging that they arranged for then-state Sen. John Celona to be paid to advance their company’s agenda.
The 23-count indictment, which the grand jury returned today in U.S. District Court, Providence, was jointly announced this afternoon by Robert Clark Corrente, the U.S. attorney for the District of Rhode Island; Sharon Ormsby, the Federal Bureau of Investigation’s local acting special agent in charge; and Col. Steven M. Pare, the superintendent of the R.I. State Police.
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It alleges that CVS government affairs executives John R. Kramer and Carlos Ortiz engineered a consulting agreement under which CVS paid Celona $1,000 a month, from February 2000 to September 2003, ostensibly to improve the company’s image among customers. Celona’s actual job, the indictment alleges, was to thwart legislation deemed harmful to CVS and advance measures deemed favorable to the pharmacy giant.
Kramer and Ortiz allegedly also arranged for CVS to pay for other benefits for Celona, including tickets to golf outings and sporting events and travel to Florida and California.
The indictment further alleges that Kramer and Ortiz concealed the true nature of the company’s relationship with Celona from other CVS executives, from lobbyists and from the public.
Specifically, it asserts that Celona used his position as a member and later chairman of the Senate Corporations Committee to block legislation, known as Pharmacy Freedom of Choice, designed to allow any willing pharmacy to participate in a health insurance reimbursement network. CVS was a member of what then was a restricted network with a particular insurer, and had made defeating the legislation a primary objective, the officials noted.
Celona previously had co-sponsored Freedom of Choice bills and had voted in favor of such measures at least three times. Yet after becoming a CVS consultant, the indictment states, he withdrew his support, instead working to block the legislation.
The indictment alleges that in March 2000, a month after becoming a CVS consultant, he walked out of a meeting to avoid voting on such a bill; in February 2001, after becoming the corporations chairman, he intentionally withheld a Freedom of Choice bill from consideration by the committee; and in 2003, he again withheld the proposal from consideration.
In addition, the indictment alleges that, at the bidding of Kramer and Ortiz, Celona worked to advance legislation allowing the electronic filing of prescriptions and to block legislation that would have allowed Canadian pharmacies to do business in Rhode Island.
Allegedly at the request of Ortiz, the indictment says, Celona sponsored a 2001 bill that would have required pharmaceutical manufacturers to accept returns from pharmacies, and used his position as a board member at the R.I. Student Loan Authority to persuade the authority to establish a loan program for pharmacy students.
During a golf outing in August 2003, Kramer allegedly told Celona that CVS could no longer pay him, because of “increased public scrutiny.” The indictment says the payments ceased the next month, but in October, Kramer took Celona on an all-expenses-paid trip to a celebrity golf tournament in San Diego.
Kramer and Ortiz are charged with conspiracy to deprive the citizens of Rhode Island of their right to Celona’s honest services; with 21 counts of using the mails to do so; and with bribery.
The conspiracy charge carries a maximum penalty of five years in federal prison and a $250,000 fine. The mail-fraud charges each carry a maximum penalty of 20 years in prison – or five years, for the six counts allegedly committed before July 2002 – and a $250,000 fine. The bribery charge carries a maximum penalty of 10 years in prison and a $250,000 fine.
No date has been set for their arraignment in U.S. District Court, the officials said.
Kramer and Ortiz are to be prosecuted by Assistant U.S. Attorneys Gerard B. Sullivan and Dulce Donovan. The investigation that resulted in their indictments was conducted by the FBI and the state police.
John Celona pleaded guilty to federal mail-fraud charges in August 2005, admitting he had accepted payments from private companies to do their political bidding while he was serving as a state senator. He since has cooperated with the government’s influence and corruption probe at the R.I. General Assembly, the officials said.
Celona’s sentencing is scheduled for Jan. 31.
