updated 4/24/2008 10:19:14 PM ET 2008-04-25T02:19:14

A federal judge on Thursday ordered a Philippines company to pay back $100 million it swindled from the U.S. military's health insurance program.

Health Visions Corp., which pleaded guilty to mail fraud, was ordered to liquidate all assets within 10 months and give the proceeds to the U.S. government.

Federal prosecutors say the company bilked the military's Tricare program out of $99.9 million between 1998 and 2004. The program insures 9.2 million current and retired servicemen and dependents worldwide.

The company routinely inflated claims by more than 230 percent, operated a phony insurance program and billed for medical services never delivered, court records showed, and the Pentagon moved slowly to uncover the scheme.

‘Death sentence for the company’
Assistant U.S. Attorney Peter Jarosz described Health Visions as the biggest violator yet in a long-running investigation into Tricare fraud in the Philippines.

"This is basically a death sentence for the company. It will no longer exist and that will protect the Tricare program since it was the biggest violator," he said after the hearing. "We got what we needed out of this prosecution."

The United States closed its military bases in the Philippines in 1992 and withdrew its active-duty forces, but thousands of retirees remained.

Formed in 1997, Health Visions owned and operated hospitals and clinics in the Philippines and billed Tricare on behalf of other health care providers.

On top of the $99.9 million in restitution, U.S. District Judge Barbara Crabb ordered the company to forfeit an additional $910,000 and pay a $500,000 fine.

Health Visions will be required to sell off land, office buildings and hospitals in the Philippines and an airplane and houses in the U.S. under Crabb's order. The company has run into problems selling hospitals because of ownership disputes, and Jarosz said it was uncertain whether the U.S. government would ever recover the full amount.

The company's lawyer, Christopher Kelly, declined to comment. He told Crabb he had nothing to add beyond a plea agreement, which was unsealed on Thursday.

Massive fraud
Health Visions and its former president, Thomas Lutz, were hit with a 75-count indictment in 2005.

Lutz, a U.S. citizen who turned 41 on Thursday, has pleaded guilty to his role in a kickback scheme and could face up to five years in prison when he is sentenced. A date for that hearing will be scheduled shortly now that the company has been sentenced, Jarosz said.

The case has been an embarrassment to the Pentagon, where different branches have blamed one another for allowing the company's fraud to slip through the cracks.

The fraud was so extensive that claims from the Philippines increased by 2,000 percent between 1998 and 2003 even as the number of Tricare beneficiaries remained the same. Payments to the country went up from less than $3 million to more than $60 million during that time.

The Office of Inspector General has criticized Tricare's managers for waiting years to cut off payments to Health Visions after suspecting the company of fraud.

William Winkenwerder, former assistant secretary of defense for health affairs, said Thursday that the inspector general's office was partly to blame because it refused his requests to send additional investigators to the country. He said he worked hard to stop the problems after they came to his attention in 2003.

Asked how the company was able to defraud the program of $100 million, Winkenwerder said: "There were some very deceptive practices that were occurring. The fact that this was a faraway location did add to the challenge of uncovering problems. And they didn't get away with it ultimately, which is the good news."

The investigation has been handled by prosecutors in Wisconsin because WPS Health Insurance, a Madison company, is the subcontractor that handles most overseas claims. About three dozen others have been indicted, mostly U.S. military veterans and Philippine doctors.

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