PROVIDENCE – Gerard M. Martineau, former House Majority Leader and Corporations Committee chairman, has agreed to plead guilty to federal mail fraud and influence-peddling charges, U.S. Attorney Robert Clark Corrente and Federal Bureau of Investigation Special Agent in Charge Warren T. Bamford announced at a news conference this afternoon.
According to the two-count “information” filed today in U.S. District Court, Providence, along with an agreement in which Martineau agrees to plead guilty and waives indictment, Martineau established The Upland Group in 1998 as a personal business entity, and thereafter arranged to sell promotional prescription bags to two companies, both of which “contracted with a private law firm … for lobbying services.”
The investigation that yielded the plea stems from a continuing public corruption investigation by the FBI, other federal agencies and the R.I. State Police into connections between state legislators and institutions that had dealings with the General Assembly.
The two companies allegedly involved in the scheme involved were:
• The pharmacy benefits management (PBM) division of a pharmacy company that the information called “a for-profit corporation incorporated under the laws of the State of Delaware.”
CVS/pharmacy was named in previous investigations involving two Roger Williams Medical Center executives as well as former state Sen. John A. Celona and two former CVS executives.
Reached this afternoon, CVS spokesman Michael J. DeAngelis said, “Earlier today we learned that former State Representative Martineau has agreed to plead guilty to federal charges resulting from the federal government’s investigation of his business relationships with Rhode Island companies. As has been previously reported, CVS has had a business relationship with Mr. Martineau since the 1980s, prior to his joining the legislature, which has continued since he left the legislature. The company has fully cooperated with the government in connection with its investigation of this matter since its inception.”
• A health insurer described in the information as “a not-for-profit corporation incorporated under the laws of the State of Rhode Island as a hospital service corporation” and “the largest health care insurer in Rhode Island,” a distinction claimed by the Providence-based Blue Cross & Blue Shield of Rhode Island. (“We are not permitted by the rules we operate under to identify any entities not specifically charged, so I am not confirming or denying your inference [regarding the insurance company’s identity],” U.S. Department of Justice spokesman Thomas Connell told Providence Business News in a telephone interview.)
When asked for comment, BCBSRI spokeswoman Kim Keough told Providence Business News: “We are cooperating fully with the investigation. Because it is an ongoing investigation it would be inappropriate to comment at this time.”
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Upland sold paper prescription bags to the health insurer and both paper and plastic bags to the pharmacy company, with Martineau billing the companies for lots of one to three million bags at a price of $19,500 per million – in some cases, just days or weeks before a legislative session began – the information said.
In return, prosecutors contend, Martineau changed his position on “Pharmacy Freedom of Choice” or “Any Willing Provider” legislation, which both companies opposed, and on other legislation on the companies’ agendas. He had been a supporter of pharmacy freedom of choice until 1999, when he “announced his opposition to the legislation and subsequently used his position as majority leader to stymie its passage,” the federal announcement said. Between 1999 and the end of the 2002 Assembly session, he also worked for or against other legislation on the two companies’ agendas, including a 1999 bill that would have facilitated the insurer’s sale to a for-profit company, federal officials said.
“Martineau is alleged to have been paid more than $900,000 in the two schemes,” Corrente noted. In all, the information said, the former legislative leader contracted to sell the insurer 10 million bags but manufactured fewer than 2 million, billing the insurer $195,000 for the bags and receiving payments totaling $175,500 – for all but the final $19,500 invoice submitted in 2003 – while also receiving $716,435 in payments from the pharmacy, on contracts to provide the company with promotional bags.
“For many months, this office – along with Public Integrity Section of the Department of Justice, the FBI and other federal law enforcement officials, and the R.I. State Police – has been actively engaged in a large and complex public corruption investigation into relationships between Rhode Island legislators and entities that have interests in legislation and activities of the General Assembly,” Corrente said in a statement. “To date, that investigation has yielded a number of convictions, one former state senator is in federal prison, and the Roger Williams Medical Center is operating under the terms of a deferred prosecution agreement.”
Martineau is charged with two counts of “honest services mail fraud,” for using the mail to deprive Rhode Island citizens of their right to his honest services in the General Assembly, Corrente said. Each count carries a maximum penalty of five years in prison and a fine of $250,000 or twice the amount of the gain or loss.
The announcement noted that “even though Martineau has signed an agreement to plead guilty, he has not yet entered a plea. He will have an opportunity to formally enter a plea at a U.S. District Court hearing that has not yet been scheduled.”
Additional information is available from the U.S. Attorney’s Office for the District of Rhode Island at www.usdoj.gov/usao/ri.
