Benefits Administrator for Virginia Contractor Sentenced

Edward J. Riley Jr. was an innovator.  Not only did he run a benefits firm, but he also developed software to speed the accounting process for construction contractors.  But he was innovative in a much different way when it came to the health care sector.  This past July in Virginia federal court Riley received a two-year prison sentence, to be followed by three years of supervised release, for wire fraud.  He’ll also have to pay $554,610.58 in restitution, mainly to union-sponsored benefit plans.  Most of the affected employees belong to the Security, Police, and Fire Professionals of North America.                      

Riley was president and CEO of a company, the Cleveland-based PrevWage Administrators, LLC, which served as a third-party administrator (TPA) for various security-guard firms under federal contract.  The main job of a TPA is to forward benefit deductions from employee paychecks to the appropriate insurance companies and/or plans.  Additionally, and fatefully, Riley also served as trustee for the self-funded health and welfare plan of MVM, Inc., a Vienna, Va.-based security company.  According to court records, Riley diverted union benefit deductions for his own personal use, concealing the fraud by submitting false financial reports and a supporting bank statement to MVM.  He pleaded guilty this past April.  Most of the thefts, about $483,000, had been committed against the MVM health plan.  (U.S. Department of Labor, Office of Inspector General, 4/1/07-9/30/07; other sources).