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Ex-agents plead guilty in Big Easy investigation

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NEW ORLEANS—Two former insurance agents pleaded guilty to federal extortion charges earlier this month in an alleged kickback scheme involving the former risk manager of a New Orleans public school system, said Jim Letten, the U.S. Attorney General for the Eastern District of Louisiana.

Independent agents Glenn Davis and Charles Swanson admitted to giving "thousands of dollars" in kickbacks over several years to Carl Coleman, the former risk manager of the Orleans Parish School System who demanded the illegal payments in order for the agents to retain their highly lucrative health insurance contracts with the system.

The health insurance contract with Coventry Health Care of Louisiana Inc., which has not been charged with any wrongdoing associated with the alleged scheme, generated as much as $100,000 a year in commissions for the agents, according to Mr. Letten's office.

Messrs. Davis and Swanson, who were indicted in June, were charged with two counts of violating the federal Hobbs Act, each count of which carries a maximum statutory penalty of 20 years in prison.

Mr. Davis also pleaded guilty to tax evasion for failing to report more than $150,000 in income in 2000, which carries an additional three-year sentence. Sentencing is set for March 29, 2007.

Attempts to reach Messrs. Davis' and Swanson's attorneys were not successful.

According to court papers, Messrs. Davis and Swanson conspired with Lillian Smith Haydel, another independent agent on the school system's Coventry Health Care contract, who pleaded guilty to conspiracy in October 2004 and awaits sentencing.

Beginning in August 1997, the three insurance agents met covertly to discuss kickback payments to Mr. Coleman, according to Messrs Davis' and Swanson's indictment. In the beginning, the three individually paid Mr. Coleman cash kickbacks of approximately $1,000 a month, but later decided as a group that it would be easier to hide payments to Mr. Coleman if just Mr. Swanson made the payments.

Mr. Coleman pleaded guilty to Hobbs Act conspiracy and income tax violations in February 2004 in connection with a $300,000 cash kickback deal he orchestrated on contracts to repair four schools damaged by three fires and a flood over a three-month period. He awaits sentencing.

The guilty pleas by Messrs. Davis and Swanson are the latest development in the large-scale investigation by federal officials into corruption at the Orleans Parish Public School System. Authorities so far have brought charges against 24 people, 22 of whom have pleaded guilty.

"The task force is still operating in full force, and several new corruption indictments are expected in 2007," the U.S. Attorney's office said in its statement.