Martineau pleads guilty to public corruption charges

PROVIDENCE – Former House Majority Leader Gerard M. Martineau today pleaded guilty to federal corruption charges in U.S. District Court, Providence.
The former state legislator from Woonsocket admitted he arranged personal business dealings with a pharmacy company and a health insurer, then used his position to affect the fate of General Assembly legislation in which the companies were interested, according to U.S. Attorney Robert Clark Corrente and Assistant Attorney General Alice S. Fisher of the U.S. Justice Department’s Criminal Division, who announced the plea this afternoon.
An agreement calling for Martineau to enter such a plea was announced Oct. 9 by Corrente and Federal Bureau of Investigation Special Agent in Charge Warren T. Bamford. (READ MORE) The companies paid Martineau nearly $900,000 for paper and plastic bags to be used in pharmacy retailing, prosecutors said.
At the plea hearing today, Assistant U.S. Attorney Gerard B. Sullivan said the government could prove that Martineau and his Upland Group arranged to sell the bags to the companies. He then used his position as Majority Leader and a member of key committees to promote the companies’ legislative agendas.
For instance, prosecutors said, the health insurer and the pharmacy company both opposed the so-called Pharmacy Freedom of Choice measure, which would have opened their closed pharmacy network to other pharmacies. Until 1999, Martineau had favored Pharmacy Freedom of Choice. But after the Upland Group began selling bags to the two companies, he announced a change in position and began working to block the bill’s passage.
Between 1999 and the end of the 2002 legislative session, when he left the Assembly, Martineau also worked to support or oppose other legislation on the companies’ agendas, prosecutors said. (“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,” U.S. Department of Justice spokesman Thomas Connell told Providence Business News last month when asked to confirm the identities of the two 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,” CVS company spokesman Michael J. DeAngelis told PBN last month, when the plea agreement was announced. “The company has fully cooperated with the government in connection with its investigation of this matter since its inception.”
Blue Cross & Blue Shield of Rhode Island also is “cooperating fully with the investigation,” company spokeswoman Kim Keough told PBN last month. “Because it is an ongoing investigation it would be inappropriate to comment at this time.”
Prosecutors said the pharmacy and Martineau had a longstanding business relationship before 1999, with Martineau selling commodities to the company for a commission. After he formed Upland Group, he arranged to begin selling plastic and paper bags to the company, and between 1999 and the end of 2002, he received a total of $716,435 in commission payments on those sales.
Beginning in 1999, Martineau also billed the health insurance company for 10 million bags at $19,500 per million, though fewer than 2 million were ever manufactured. Of the $195,000 total, the insurer paid him $175,500 – all but the final invoice, for $19,500, that was submitted by Martineau in 2003, after he left the Assembly.
Yet, Sullivan told the court, Martineau never disclosed his conflicts of interest to Rhode Island voters. He even took steps to conceal the business relationships, such as not signing his name to invoices and falsely signing the name of another person on correspondence with the insurer, prosecutors said.
Martineau pleaded guilty – before Chief U.S. District Court Judge Mary M. Lisi – to two counts of “honest services” mail fraud: using the mail to deprive Rhode Island citizens of their right to his honest services. 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.
He remains free on unsecured bond pending his sentencing, which Lisi scheduled for Feb. 22.
Besides Sullivan, prosecutors included Assistant U.S. Attorney Stephen G. Dambruch and trial lawyers Daniel A. Petalas and Peter C. Sprung of the Department of Justice, Public Integrity Section.
The charges against Martineau were the result of a continuing public corruption investigation by the R.I. State Police, Federal Bureau of Investigation and other federal agencies into the relationships between R.I. legislators and entities with local legislative agendas. Additional information is available from the Office of the U.S. Attorney, District of Rhode Island, at

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