Texas man pleads guilty for his role in operating sham medical reimbursement account program

Published 5:56 pm Saturday, July 10, 2021

According to court documents, The Total Financial Group (TTFG) was a Louisiana business incorporated by Denis and Donna Joachim with the Louisiana Secretary of State on or about January 6, 2005, TTFG was most recently located at 406 N. Florida Street, Covington, Louisiana.  TTFG had at least 13 employees and 56 independent sales agents.  BORINO, employed with TTFG since 2012, served as the National Executive Marketing Director for TTFG.  In that capacity, BORINO supervised, trained, and instructed TTFG’s regional sales personnel.  BORINO primarily handled issues agents, prospective clients, and enrolled clients encountered.

TTFG and its owners, with BORINO and others, created and marketed a Medical Reimbursement Account program called “Classic 105.”  Classic 105 claimed to be a multiple employer welfare arrangement that was marketed to employers as a supplemental benefits plan for their employees to reimburse them for medical expenses such as co-pays and deductibles.  All participants in Classic 105 were required to have a primary health insurance plan unrelated to and in addition to Classic 105.  Classic 105 claimed to be comprised of several components: a tax-exempt contribution of between $1,000 and $1,600 per month made by an employee (which reduced the employee’s taxable income), a loan from a lender back to the employee to make up for the contribution, an insurance policy payable to the lender at the employee’s death to repay the loan, and fees paid by the employee and the employer directly to TTFG.  TTFG told prospective employer-clients that participants would never have to make out-of-pocket payments to repay the loan and that as a result of the tax savings, most participants would receive an increase in their net take home pay.  TTFG’s marketing program told prospective employer-clients that the contributions would be stored in a unique account for each employee-participant and that any money not used by the end of each calendar year would revert to TTFG.  TTFG also charged employee-participants a fee of between $150 and $250 per month and the employer a fee of five percent of each employee’s contribution amount.  At its peak, over 350 employer-clients and 4,400 employee-participants nationwide were enrolled in TTFG’s Classic 105 program.

According to court documents, TTFG committed wire fraud by virtue of how it actually operated Classic 105.  TTFG never obtained a single loan or insurance policy for the Classic 105 program, and participants never made any actual contributions.  The only money tendered to TTFG by employer-clients and employee-participants were fees. As a result, employee-participants and employer-clients were defrauded into enrolling in, and paying fees for, the Classic 105 program by means of fraudulent pretenses, representations, and promises.  Additionally, participants and employers were exposed to potential adverse financial consequences, including not only unpaid taxes, fees, and penalties, but also ineligibility from certain government programs, including unemployment payments, and reduced Social Security payments.

Despite having knowledge of these events, which constituted wire fraud, on multiple occasions, BORINO did not make known the information and attempted to conceal it.  For example, in September 2014, BORINO was told that “TTFG has not made any deals with any banks in any state” and also had “not solicited nor [sic] received any pooling of funds from a group of individuals.”  In the subsequent months, when subordinates asked BORINO specific questions about the loan component and passed along concerns that Classic 105 was “a scam and likely an illegal tax dodge,” BORINO failed to disclose what he had been told: that there were no entities providing loans.  In subsequent years, BORINO continued to represent to subordinates and prospective customers that loans from “Wall Street banks,” community banks, and various “investing vehicles” funded the loan component.

BORINO faces a maximum term of imprisonment of three (3) years, a $250,000 fine, one year of supervised release, a $100 mandatory special assessment fee and he is subject to a restitution order for his conduct.  Sentencing has been scheduled before Judge Vitter for November 9, 2021.

U.S. Attorney Evans praised the work of the United States Department of Labor – Office of Inspector General and Employment Benefits Security Administration, the Federal Bureau of Investigation, and IRS-Criminal Investigations in investigating this matter.  Assistant United States Attorneys Jordan Ginsberg, Maria Carboni, and Andre Lagarde are in charge of the prosecution.