The Securities and Exchange Commission has brought civil fraud charges against Thomas P. Clark, the former chief financial officer of Health Risk Management Inc., which is currently in bankruptcy proceedings.
The commission stated that its action stems from Clark’s treatment of a $1.85 million settlement payment that he negotiated on behalf of Health Risk Management and its wholly owned Medicaid HMO to settle an arbitration dispute with one of the HMO’s health-care providers.
According to the complaint, in August 2000 Clark sought to hide the full amount of the settlement expense by simultaneously executing two agreements with the provider: a settlement agreement that called for the HMO subsidiary to pay the provider $500,000 in exchange for a release and a $1.35 million five-year consulting agreement.
The SEC alleged that the consulting agreement required HRMI to pay a $1.35 million “retainer” for services that the company did not need and which were never provided. The commission also claimed that Clark booked the $1.35 million payment as an asset rather than as a settlement expense, “causing HMRI to file materially false financial statements” for the second and third quarters of 2000. In addition, the SEC accused Clark of failing to inform HRMI’s outside auditors about the consulting agreement and the true dollar figure of the settlement.
That same year, Clark was promoted by HRMI to executive vice president for acquisitions and business development; he was succeeded by Leland LeBlanc, who remains CFO. Clark’s name was not listed on the company’s contacts page as of February 1.
The SEC stated that it is seeking a civil monetary penalty from Clark and an order barring him from acting as an officer or director of any securities issuer.