Con's Con

A contained experiment in Medicaid finally gets uncovered

The numbers speak for themselves: On December 6, 1997, for example, Coates submitted bills for 696 hours' worth of counseling that day. A week later, she billed for 688 hours in a single day. The week after that, the number topped 850 hours.

Flemons, meanwhile, started a branch in Houston near the Astrodome. The expansion, Coates says, was an idea Flemons got while he was attending a court-ordered rehab program in Houston. "The counselor there was a drug addict and they became friends, so they opened an office there," Coates says.

Business boomed. In 1995, they took in just $9,200 worth of Medicaid payments. By 1999, with the new Houston office open, they had netted more than $970,000 and were well on their way to passing the million-dollar mark when the feds arrived in May 2000. In just over four years, the couple amassed a net of $2.8 million.

Coates says her marriage to "snuggle bunny" started her skid into crime.
Mark Graham
Coates says her marriage to "snuggle bunny" started her skid into crime.

As a free man, Flemons would tap the company's bank account for spending money. FBI agents discovered that it wasn't unusual for Flemons to go through $3,000 in a week. That didn't include the six-figure salary he paid himself, even while he was confined. Perhaps he justified the salary by the work he accomplished inside his jail cell, where he monopolized the communal telephone.

Usually, Flemons called the office on Mondays to see how many billable hours the staff had submitted to Medicaid. He'd call back on Wednesdays to ensure that the reimbursements had been automatically deposited. Other days, Flemons would guide his staffers through computer glitches and other routine problems, according to staffer Ginny Thorpe, who later testified against Flemons.

"Michael would walk me through over the phone sometimes," Thorpe testified, adding that the conversations came in spurts. "He would call back because the phone would get disconnected."

During his trial in January, public defender Richard Goldman argued that Flemons couldn't have carried out the scheme because he was in jail. The defense strategy might have worked, if it weren't for the memos.

"They showed he was just up to his ears in it," says Read, the assistant U.S. attorney.

Flemons scolded his employees in one memo for billing errors that caused the company's rejection rate by Medicaid to reach 19 percent. In another memo, he promised his staff that the year 2000 was going to offer "unique opportunities" for the company to "solidify itself in the current ever changing health industry." At the end of the memo, he wrote, "see the vision, catch the fire, walk the victory!"

At his sentencing hearing, Flemons humbly confessed that he "neglected" his responsibilities as a manager.

"In my pursuit of drugs, I guess I left no stones unturned. I've been paying the price for it and rightfully so," Flemons said. "I'd hate to think of the number of people who could have received services but didn't because of this fraud."

Coates, with her health problems, will now spend her time in the Federal Medical Center prison unit in Fort Worth, a fairly easy existence. Her days consist of rising from bed, eating, watching her favorite soap operas, eating and going back to bed."Actually, it isn't too much different from the way I was living on the outside," Coates says, "except I have a lot more company."

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