Ex-Dauphin County insurance manager charged in $490,000 scam ...

A former Dauphin County official who was supposed to be a watchdog over part of the county?s insurance system has been charged with scamming that system out of $490,000.

The district attorney?s office claims that Garry Esworthy, 58, of Lower Paxton Township, former county risk manager, ran his alleged con for five years.

It involved a dozen bogus invoices for insurance services that the county paid to Risk Management Consultants, a shell company that Esworthy set up under his wife?s name, according to arrest documents.

Esworthy, who retired from the county for health reasons in June, is charged with theft by unlawful taking and unlawful use of a computer. He is free on $500,000 unsecured bail pending a preliminary hearing next month.

Esworthy declined comment on the charges when he answered the door at his home. He said he doesn't have a lawyer.

In arrest papers, Detective Sgt. David Hodges stated that Esworthy admitted to running the scam when interviewed by investigators Tuesday. He said he staged it to pay for large credit card bills and health-related expenses from his multiple medical problems, according to Hodges.

?There was certainly a level of sophistication here,? First Assistant District Attorney Fran Chardo said of the alleged fraud.

County officials expressed surprise and dismay at the accusations against Esworthy, who had been overseeing the county?s liability and workers compensation insurance programs since 2001.

There was some finger-pointing, too.

?When I heard about this I had some questions myself,? county Commission Chairman Jeff Haste said this morning. ?My main objective now is that we correct whatever defects there were in the system so this can never happen again.?

He questioned why insurance billings that weren?t legitimate were approved for payment by the county controller?s office. Commissioners didn?t see those checks, he said.

Gary Serhan, chief deputy controller, said there was nothing to raise a red flag about the scam because Esworthy was supposed to be part of the system to head off fraud.

?This fraud was perpetrated on us and one of the county?s insurance companies under the guise of legitimate insurance transactions approved by the commissioners? risk manager,? Serhan said.

Hodges said in arrest filings that Esworthy kicked off the alleged scheme in July 2007 after creating Risk Management Consultants of PA, which he registered with the Pennsylvania Department of State under the name of his wife, Kim Campbell.

Esworthy submitted bogus insurance billing invoices from RMC to one of the county?s insurers, Inservco Insurance Services, Hodges said. He said that when Esworthy in turn got those billings from Inservco, he used his authority as risk manager to have the county pay them.

Those payouts totaled $120,000 between July 2007 and February 2012, investigators said.

They said Esworthy netted another $370,000 between June 2010 and May 2012 by sending fake RMC invoices directly to the county.

Hodges said the scam was uncovered after Esworthy retired.

The detective said Donna Miller, administrator of the county?s insurance and safety program, probed some of the invoices and found they were essentially double billings for insurance the county already had. She also found other billings for which no justification could be found, Hodges said.

Examination of RMC accounts at Metro Bank and Wells Fargo Bank determined that the stolen money was deposited in accounts over which Esworthy had sole control, Hodges said.

Chardo said at this point it appears that Esworthy conducted the alleged scam alone. A standard range sentence for a conviction in the case would be 9 to 16 months in prison, Chardo sai

Serhan said the alleged Esworthy scam succeeded in part because a legitimate insurer, Inservco, was used as a blind to conceal many of the fraudulent transactions.

The fraud shows the need to improve and better integrate the county?s accounting, contract and purchasing system, he said. Not only his office, but also the commissioners, had the ability to examine the payments that were made to RMC, Serhan said.

?I never had anything like this,? Serhan, a 33-year veteran of the controller?s office, said of the alleged Esworthy scam. ?Embezzlement is pretty difficult to stop.?

Haste said commissioners don't yet know whether insurance will cover the county for the alleged thefts.

He said he is particularly taken aback that Esworthy, a West Point graduate and military veteran, is accused of having done such a thing. ?You never want to see a quality person go bad,? he said.

A former Central Dauphin School Board member, Esworthy is the second Dauphin County executive to be charged in a financial fraud scheme in as many years.

Last December, Timothy Truax of Steelton, a former manager of a federally-funded county housing rehabilitation program, was sentenced to 2? years in federal prison after pleading guilty to engaging in a kickback scheme with contractors.

Source: http://www.pennlive.com/midstate/index.ssf/2012/11/ex-dauphin_county_insurance_ma.html

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