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Fraudster sentenced for health insurance scam


LOS ANGELES—A California man convicted of operating a bogus group health insurance scheme that left more than $20 million in unpaid claims has been sentenced to 25 years in prison.

James Graf, who headed the now-defunct Employers Mutual L.L.C., was also ordered to pay more than $20 million in restitution.

Mr. Graf was convicted in 2005 on multiple charges of fraud and money laundering for siphoning millions of dollars in employer premiums from Employers Mutual while falsely claiming that its health plans were insured by such licensed insurers as Golden Rule Insurance Co. and Sun Life of Canada.

Insurance departments in several states ordered Employers Mutual to stop offering health coverage, though Mr. Graf claimed that its plans were covered by the federal Employee Retirement Income Security Act of 1974 and were exempt from state regulation. Federal and state regulators shut the company down in 2001.

Kari Hanson, another Employers Mutual official who has pleaded guilty to misappropriating premiums and other charges, is scheduled to be sentenced by U.S. District Judge Margaret M. Morrow later this month.

Employers Mutual is unrelated to Employers Mutual Casualty Co. of Des Moines, Iowa.