Wealthy Minnesota Couple Sentenced for Government Benefit Fraud

May 07, 2013

MINNEAPOLIS—Earlier today in federal court in Minneapolis, a North Oaks couple was sentenced for committing health-care fraud, specifically making false statements to garner, county, state, and federal benefits and assistance for their disabled children. James N. Hood, age 69, was sentenced to 42 months in federal prison and ordered to pay a $200,000 fine on one count of mail fraud, one count of health care fraud, and one count of theft of public money. His wife, Cynthia Marsalis Hood, age 55, was ordered to serve three years of probation and pay a $300,000 fine on one count of mail fraud and one count of making a false statement for use in determining rights to Social Security benefits. The couple was also ordered to pay restitution in the total amount of $483,312.82 to the agencies victimized by this crime. The Hoods were charged on October 1, 2012, and pleaded guilty on October 24, 2012.

In sentencing the couple, U.S. District Court Judge Joan N. Ericksen reiterated that this was not a victimless crime. She said these programs were meant for people in financial need, and because of the wrongdoing of the Hoods and other fraudsters, these programs could become at risk. She also said that the couple clearly knew right from wrong and took this action for their own personal gain.

Following today’s sentencing, Daniel Seymour, Resident Agent in Charge of the Social Security Administration-Office of Inspector General’s (“SSA-OIG”) St. Paul Office, said, “SSA-OIG worked with federal, state, and local law enforcement partners to bring the investigation of James and Cynthia Hood to a successful conclusion. That investigation revealed that the Hoods, despite owning more than $10 million in investments, property and more, stole more than $80,000 in Supplemental Security Income (“SSI”) payments from the federal government. SSI provides a base-level, safety net income for uninsured aged, blind, or disabled individuals with very limited income or resources. The successful prosecution of this case demonstrates what can be accomplished when law enforcement partners work together to combat fraud, waste, and abuse of taxpayer dollars. SSA-OIG is gratified to see this case brought to justice, and is committed to continuing to protect SSA programs from fraud.”

The court documents on file in this case provide that during a five-year period, from January 2006 to April 2011, the couple stole approximately $400,000 in state and federal Medicaid money in addition to the $80,000 in Social Security benefits noted above. To that end, James Hood prepared false federal income tax returns that Cynthia Hood joined him in signing. Those returns were the basis of subsequent benefit applications. In addition, the couple offered false information in the benefit applications themselves, during related in-person interviews, and through income-update forms.

“Our publicly funded programs are meant to serve those in need and every dollar stolen is a dollar taken from a struggling family. Today’s sentencings send a clear message that fraud, waste, and abuse of public funds is not a victimless crime and will not be tolerated in Minnesota,” said Minnesota Department of Human Services Inspector General Jerry Kerber. “Today’s sentencings are the result of an on-going collaborative effort between federal, state, and county governments to fight fraud and abuse in health care and together we will continue to enforce the integrity of public programs.”

Following Hurricane Katrina in 2005, the Hood family, residents of New Orleans at the time, visited several states and eventually decided that Minnesota provided a high quality of life and the best health care and educational resources for their disabled children. After they moved to Minnesota, they applied for a variety of aid on behalf of those children, including, but not limited to federal Social Security supplemental income benefits, State Medical Assistance, Cost-Effective Health Insurance, and Community Alternatives for Disabled Individuals. They also obtained medical insurance assistance from Louisiana.

Eligibility for many benefit programs is based on the applicant’s disabilities and, for children, the parents’ income and resources as well as their financial contributions. To receive Social Security Supplemental Security Income benefits, for example, a single applicant cannot own more than $2,000 in income and assets, excluding a house and vehicle. To secure benefits for themselves, the Hoods falsified government documents and lied to government officials.

Lamont Pugh III, Special Agent in Charge of the U.S. Department of Health and Human Services-Office of Inspector General for the region that includes Minnesota, said of the case, “The Hoods seem to have forgotten that Medicaid exists for the country’s most needy citizens, not to enrich those who have achieved financial security. We will continue to work with our federal, state, and local law enforcement partners to ensure that these health care dollars are protected, and criminals who would defraud taxpayers are held accountable.”

During all times relevant to this case, James Hood was the sole heir to family estates and held substantial stock in AT&T, General Electric, and Exxon Mobil, among other companies. His dividend income totaled as much as $156,000 in a given year. He also maintained more than 65 bank accounts, which netted up to $183,000 in interest income annually. Moreover, he owned Iowa farmland and received farm-related payments from the U.S. Department of Agriculture’s Farm Service Agency as well as the State of Iowa. In 2005, the farm yielded Hood income of $187,910.98, but no farm-related values or incomes were reported in his benefit applications or income updates. Likewise, he failed to disclose significant financial gifts received from family trusts. During much of this time, James Hood also served as a professor at Tulane University.

Yet, in 2005, the couple applied for Medical Assistance and, in their application, listed only James Hood’s teaching salary and a small amount of dividend income. Moreover, when they applied for health insurance assistance, they failed to disclose that they were simultaneously seeking and receiving insurance assistance from the State of Louisiana.

In addition, Cynthia Hood repeatedly made false statements to the SSA in support of her children’s continued eligibility for Social Security Supplemental Security Income. Specifically, in 2006, she stated that her husband lived in Louisiana. She falsely reported that she did not own any homes, vehicles, stocks, bonds, or property. And she reported that she only had one bank account with a balance of $1,400. In fact, at the time, Cynthia Hood held at least 16 bank accounts jointly with James Hood. Later, she reported to the SSA that her Minnesota household only consisted of herself and her three children, claiming her husband lived in Iowa. In truth, her husband was living with her and financially supported the household.

In 2007, the couple submitted a renewal application with the Minnesota Health Care Program, which stated that James Hood was on unpaid leave from Tulane. In that document, the only income indicated was the children’s Social Security disability benefits. Similar statements were also made thereafter.

Ramsey County Attorney John Choi said, “I am grateful for the hard work that my staff put into investigating and confirming the facts of this case prior to handing it onto the U.S. Attorney’s Office. We take fraud very seriously and are especially thankful for the cooperative working relationship with the (Minnesota) Department of Human Services in this investigation.”

This case was the result of an investigation by the SSA-OIG, the U.S. Department of Health and Human Services’ Office of Inspector General, the Minnesota Department of Human Services’ Office of Inspector General, and the Ramsey County Attorney’s Office. It was prosecuted by Assistant U.S. Attorney Laura M. ProvinzinoMINNEAPOLIS—Earlier today in federal court in Minneapolis, a North Oaks couple was sentenced for committing health-care fraud, specifically making false statements to garner, county, state, and federal benefits and assistance for their disabled children. James N. Hood, age 69, was sentenced to 42 months in federal prison and ordered to pay a $200,000 fine on one count of mail fraud, one count of health care fraud, and one count of theft of public money. His wife, Cynthia Marsalis Hood, age 55, was ordered to serve three years of probation and pay a $300,000 fine on one count of mail fraud and one count of making a false statement for use in determining rights to Social Security benefits. The couple was also ordered to pay restitution in the total amount of $483,312.82 to the agencies victimized by this crime. The Hoods were charged on October 1, 2012, and pleaded guilty on October 24, 2012.