Former La. Lawmaker: Restitution Cash from Insurance Co. Liquidation

March 20, 2008

Former Louisiana Senate president Michael O’Keefe, serving 19.5 years for stealing from a failed medical malpractice insurance company, said he and his codefendants plan to pay $4.7 million in restitution by using money from the liquidation of another company connected to that case.

O’Keefe, acting as his own attorney from the federal prison in Beaumont, Texas, wants a federal judge to cancel an order garnishing his state pension for his $1.2 million share of restitution to Physicians National Risk Retention Group.

The money would come from the liquidation of Lloyds Assurance of Louisiana, O’Keefe wrote in papers filed March 10 in U.S. District Court.

Prosecutors have not yet filed their response; Assistant U.S. Attorney Peter Mansfield said he cannot comment about current litigation.

Judge Mary Ann Vial Lemmon scheduled a hearing April 10.

O’Keefe, his son-in-law, Eric Schmidt, and businessmen John O’Brien and Gary Bennett were convicted in March 1996 of conspiracy, money-laundering and mail and wire fraud. They began serving their terms in April 1999.

They had been hired to rescue the struggling medical malpractice insurer, but prosecutors said they skimmed $7.5 million from Physicians National, leaving hundreds of doctors around the nation without insurance.

“Defendant O’Keefe has not waited for his release to address the payment of restitution,” he wrote in a court filing. “Defendant and his co-defendants began working on the payment of the restitution immediately after all appeals were exhausted.”

O’Keefe’s relationship to Lloyd’s was not immediately clear.

The state Insurance Department took over Lloyd’s Assurance and three others – including another medical malpractice insurer – in 1994.

State records at the time listed Schmidt as president of those companies, though his attorney said he was not president but agent and attorney for Lloyd’s Assurance; O’Keefe was listed as attorney for some of them.

O’Brien, of New Orleans, and Bennett, of Cincinnati, also were named defendants in state lawsuits consolidated with the one against Schmidt.

A state judge liquidated Lloyd’s Assurance later that year, citing evidence that more than $2 million was fraudulently taken from a trust fund set up to pay Lloyd’s claims and taxes.

The state Insurance Department had moved to liquidate Lloyds Assurance after finding that Physicians National had put $2 million into it.

Schmidt and O’Brien were sentenced to 10 years and one month each in prison; Bennett got just over eight years.

O’Keefe got the stiffest sentence because he had a previous federal conviction and a “no contest” plea, also in federal court.

O’Keefe had previously served 18 months in prison and a halfway house after being convicted in 1983 of cheating business partners out of $900,000, using forged evidence and trying to get a witness to lie about it.

In a separate case, O’Keefe pleaded no contest in 1984 in what prosecutors said was a scheme to illegally get $6 million in loans.

Former Gov. Edwin Edwards, himself now serving time in an unrelated case, pardoned him in 1986.

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