Roosevelt Hairston Jr., the former general counsel for Children’s Hospital of Philadelphia, was charged Thursday with one count each of mail fraud, money laundering and filing a false tax return.
According to the information filed by the U.S. Attorney’s Office for the Eastern District of Pennsylvania, Hairston used his senior positions at CHOP to embezzle $1.7 million from the hospital between 1999 and 2011. The information alleges Hairston created eight “shell companies,” including Educational Strategies and The Children’s Research Alliance, for the purposes of stealing the money through false invoices he created for those companies.
When questioned about some of the invoices by CHOP personnel, Hairston stole the identity of a friend and created an e-mail address in his friend’s name to send e-mails to CHOP verifying the invoices, according to the information.
In a press release issued Thursday, the U.S. Attorney’s Office said Hairston used the $1.7 million to live a “lavish lifestyle, purchasing luxury items, like real estate, a luxury yacht with a captain to maintain the yacht, high-end automobiles and many other luxury items.”
According to some, the filing of an information by the U.S. attorney, as opposed to an indictment from a grand jury, is an indicator that a plea agreement may be forthcoming.
Hairston’s attorney, Howard Bruce Klein of Philadelphia, said his client “fully admitted his mistakes when he was confronted about financial irregularities by investigators from Kroll Inc. working on behalf of CHOP.”
“What is not included in the charges that were issued today is the rest of the Roosevelt Hairston story, which should be known as well,” Klein said Thursday.
He said Hairston is a devoted husband and father of four young daughters and is also “possibly the most committed community servant and activist of any private citizen in Philadelphia.” Klein pointed to Hairston’s former roles as chairman of the Philadelphia Public Interest Law Center and the Philadelphia Workforce Investment Board as well as his mentoring of underprivileged high school kids and serving the hungry in homeless shelters.
“These are but a few of his community service activities to which he has literally devoted all of his spare time — when not with his family,” Klein said. “A person is the sum of all of their acts and contributions, and no one should be judged by one series of bad acts alone. We hope that justice is tempered by mercy in the ultimate resolution of this case.”
Hairston was terminated from CHOP in February, with the hospital saying only that he was let go due to “financial irregularities.” He had become the GC in April 2010, previously serving as senior vice president for community and government relations and deputy general counsel for the organization. Jeffrey Kahn was named in April 2011 as CHOP’s new GC.
The Legal reported in March that Hairston was fired for embezzlement of an amount in the seven figures. A source had said at that time that Hairston was simply too highly leveraged financially.
According to the information, between December 1999 and December 2003, Hairston was responsible for coordinating the defense of medical malpractice claims against CHOP. He allegedly created fraudulent invoices, claiming that expert medical witnesses had supplied services to CHOP when those witnesses either didn’t exist or didn’t provide those services, U.S. Attorney Zane D. Memeger outlined in the information he signed.
Between June 2007 and Feb. 14, 2011, Hairston allegedly took advantage of his position as head of community and government relations by falsely claiming that various companies had provided consulting services, prepared economic impact studies or provided other services to CHOP, the information said.
“Defendant Roosevelt Hairston Jr. went to great lengths to conceal his fraud and launder the proceeds of the scheme by creating numerous shell companies, opening bank accounts in the shell companies’ names, establishing phony offices for the shell companies and creating fraudulent e-mail addresses for some of the shell companies,” Memeger said in the information.
In order to prolong the scheme, according to the information, Hairston allegedly lied to his co-workers, including his personal assistant, stole the identity of a longtime friend and created false documents.
In relation to the coordination of the medical malpractice defense between 1999 and 2003, Hairston allegedly created 33 fraudulent invoices related to expert witnesses, collecting $225,000 from CHOP. The embezzlement scheme, according to the information, was suspended when Hairston was no longer able to approve invoices for expert witnesses on his own and needed approval from another CHOP official.
The alleged fraud was restarted in June 2007 when Hairston began submitting false invoices for work related to the community and government affairs function of CHOP. According to the information, Hairston submitted nearly 100 “bogus invoices” from June 2007 through Feb. 14, 2011, for services totaling more than $1.5 million.
When CHOP personnel would question Hairston about errors in the invoices, Hairston created fake documents to prevent exposing his scheme, according to the information. That included providing CHOP with a “bogus” e-mail message from a “Paul Robeson,” who claimed to be an official with L&S Data, one of the alleged shell companies. The message purportedly from Robeson said the company had ceased operations and that Robeson was going to work for the governor of Virginia. Hairston used his parents’ former Maryland address as Robeson’s address to conceal the fact that L&S Data was a shell company, according to the information.
In trying to support invoices from a company called LBS Partners, Hairston allegedly sent his assistant e-mails from someone prosecutors call “Person No. 1″ and who prosecutors said in the information was a close friend of Hairston’s who was unaware that his or her identity had been stolen. The e-mails purportedly from Person No. 1 said that the person owned LBS Partners, according to the information.
In support of the mail fraud claim, Memeger said in the information that Hairston mailed a $10,000 check on CHOP’s account to LBS Partners in payment for a “fraudulent invoice” Hairston submitted to CHOP in April 2009.
Hairston also allegedly deposited some of the payments into an account for “LBS Enterprise” and then wrote two checks from that account to Commerce Bank to pay two mortgages on his Malvern, Pa., home, according to the information.
The charge of filing a false tax return related to Hairston’s 2008 calendar year income tax filing in which he failed to report approximately $419,700 in additional income he earned from the “scheme to defraud,” Memeger said in the information.
Hairston was ordered through the information to forfeit any property derived from the proceeds of his alleged crimes, including $1.7 million.
Eric W. Sitarchuk of Morgan Lewis & Bockius represented CHOP and declined to comment on the filing of the information.
In a statement issued Thursday, CHOP said Hairston was removed from his position on Feb. 18 following an internal investigation that found evidence of financial irregularities by Hairston. The hospital said it referred the matter to the U.S. Attorney’s Office and “cooperated fully in the federal investigation that culminated in the charges filed” against Hairston.
“Today’s action by the U.S. attorney confirms what we suspected and reported earlier this year,” CHOP CEO Steven Altschuler said in the statement. “We will continue to cooperate with the U.S. attorney on this case and are continually reviewing our internal control structure to ensure the proper safeguarding of the institution’s assets.”
After being turned over by CHOP, the case was investigated by the FBI and the Internal Revenue Service Criminal Investigation Division. The case is being prosecuted by Assistant U.S. Attorney Richard J. Zack. •