Health Care Business Owners Plead Guilty To Fraud And Tax Charges On Eve Of Trial

Acting United States Attorney Gregory G. Brooker today announced the guilty pleas of three defendants for their involvement in a years-long, multi-million dollar heath care fraud and tax conspiracy. THURLEE BELFREY, 52, ROYLEE BELFREY, 52, and LANORE BELFREY, 42, pleaded guilty on September 14, 2017, before Senior U.S. District Judge Ann D. Montgomery in Minneapolis, Minn. THURLEE BELFREY pleaded guilty to conspiracy to defraud the federal-state Medicaid program and failing to pay over taxes withheld from employees’ pay. ROYLEE BELFREY pleaded guilty to two counts of failure to pay over taxes withheld from employees’ pay. LANORE BELFREY pleaded guilty to conspiring to evade personal income taxes.

Assistant U.S. Attorney Robert Lewis said, “This is another example of the close cooperation between the State of Minnesota and federal agents in exposing and bringing to justice those who commit fraud. Specifically, the efforts of the Medicaid Fraud Control Unit of the Minnesota Attorney General’s Office led to Thurlee Belfrey’s initial exclusion from the Medicaid and Medicare programs. And, thereafter federal and state law enforcement uncovered his concealed, continuing and illegal involvement in Model Health Care, the crux of this fraud.”

According to the defendants’ guilty pleas and the indictment in the case, brothers THURLEE and ROYLEE BELFREY ran multiple health care businesses that received funds from the Medicaid and Medicare programs funded by the federal government and the State of Minnesota. In 2003, following an investigation by the Minnesota Attorney General’s Office into Royal Health Care, a business they started together in the 1990s, THURLEE BELFREY was convicted of felony theft by false representation. Based on his conviction, in 2004 the Minnesota Department of Human Services (DHS) and the United States Department of Health and Human Services (DHHS) excluded THURLEE BELFREY indefinitely from participating in state and federal health care programs, with no right to seek reinstatement for up to 20 years.

Despite this, and as he admitted in his guilty plea, THURLEE BELFREY conspired with his wife LANORE BELFREY to incorporate a new health care company, Model Health Care (Model), to continue the business operations and conceal THURLEE BELFREY’S involvement therein. To do this, and part of the scheme, LANORE BELFREY was named the owner of Model and intentionally failed to disclose THURLEE BELFREY’S involvement in managing the business. Despite being excluded, THURLEE BELFREY continued to manage Model. Government payment records show Model received more than $10,000,000 from Medicaid that would not have been paid but for the fraudulent misrepresentations made about THURLEE BELFREY’S lack of involvement in the businesses. According to the investigation, THURLEE and LANORE BELFREY received millions of dollars from Model during the scheme.

While THURLEE BELFREY ran Model, ROYLEE BELFREY operated several health care businesses as well. According to the defendants’ guilty pleas, between 2007 and 2013, THURLEE and ROYLEE BELFREY deducted and collected money from their employees’ wages, ostensibly for the payment of federal payroll taxes and Federal Insurance Contribution Act (FICA) taxes. However, they intentionally failed to pay the withheld taxes over to the IRS over the course of many years and, instead, used the money for other purposes, including attempts to develop a reality show based on their lives, high-end housing, a Caribbean cruise, luxury retail purchases, and thousands of dollars in cash withdrawals. In total, THURLEE and ROYLEE BELFREY admitted deducting and unlawfully using for their own benefit more than $3,960,000 in withheld taxes between 2007 and 2014.

This case is the result of an investigation conducted by the Minnesota Attorney General’s Office, the Internal Revenue Service – Criminal Investigation Division, Federal Bureau of Investigation, and the Office of the Inspector General, United States Department of Health and Human Services.

This case is being prosecuted by Assistant U.S. Attorneys Robert Lewis and David Maria.

Defendant Information:

THURLEE BELFREY, 52

Saint Paul, Minn.

Convicted:

• Conspiracy to defraud the United States, 1 count
• Failure truthfully to account for and pay over withheld taxes, 1 count

 
ROYLEE BELFREY, 52
Saint Paul, Minn.
 
Convicted:

• Failure truthfully to account for and pay over withheld taxes, 2 counts

 
LANORE BELFREY, 42
Minnetonka, Minn.
 
Convicted:

• Conspiracy to defraud the United States, 1 count

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United States Attorney’s Office, District of Minnesota: (612) 664-5600