A San Antonio lawyer has been indicted by a federal grand jury on 42 health care fraud related counts, alleging that he marketed $16.8 million in “reinsurance” policies to third parties but used some of that money for personal expenses.

The indictments against Hugh Lappe Scott Jr., including 22 counts of health care fraud and 20 counts of theft from a health care benefits program, were returned by a Western District of Texas grand jury on August 7.

The background to the case, according to the indictments, is as follows.

Scott, who has at various times served as counsel and president of companies in the business of administering and obtaining reinsurance — also known as stop loss, stop gap and overlay insurance for health care benefit programs — allegedly marketed reinsurance policies to third party administrators [TPAs]. TPAs are businesses which administer the receipt of premiums and the payment of employee benefit claims to individuals on behalf of employers self-insured benefit plans, according to the indictments.

Specifically, Scott promised the TPAs and their clients that 80 percent of the moneys paid to his company would be used to pay for the premiums for reinsurance and that no more than 20 percent of the moneys would be used for his company’s “management and administrative services” the indictments allege.

Rather than purchase reinsurance, Scott kept all the funds he received from the TPAs in his companies operating bank account the indictments allege.

Scott later used the money from the companies bank account “to pay for personal expenses and purchases he had charged to his personal credit and charge accounts, by making and causing checks to be made payable to his wife” and by giving money and making mortgage payments to “persons known to the Grand Jury” the indictments allege.

Scott did not return a call for comment and neither did his attorney, San Antonio solo Mark Stevens.

Bill Miller, an assistant U.S. Attorney in the Western District of Texas who is prosecuting the case, says the allegations in the indictments are similar to a Ponzi scheme.

“Health care is a basic core need for people. It is particularly appalling when people are led to believe that insurance has been obtained for their healthcare needs, only to find that the money that was to go to premiums were used as the defendants saw fit,” Miller says of the indictments against Scott.

“It’s in the nature of a Ponzi scheme in only that it could continue depending on new money coming in,” Miller says.