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Unsuspected, UMass Medical worker stole millions

Leo Villani told people he had inherited money.

Leo Villani told people he had inherited money.

He was a $46,000-a-year financial analyst in an obscure office of the University of Massachusetts Medical School who somehow managed to drive a Porsche, collect Salvador Dali paintings, and build a palatial home for himself. When people asked about his sudden, showy affluence, Leo Villani would explain that he had inherited money.

But it turns out that Villani came into his wealth quite another way: He stole it, quietly siphoning off nearly $3.4 million from payments intended for the state Medicaid insurance program over the past five years, an internal investigation has found. It may be the biggest theft by a state employee in more than a decade.

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Officials at the Worcester medical school discovered the alleged scam only after Villani died in a one-vehicle accident in late December and a review of his work found discrepancies in the account where he was supposed to deposit checks for the Medicaid program, called MassHealth. They eventually learned that Villani had set up a dummy corporation to which he had been diverting state funds for years.

But the fact that the alleged theft went on for so long without being detected is raising troubling questions about how well UMass Medical safeguards its vast public resources. Villani’s office, part of the school’s Commonwealth Medicine division in Shrewsbury that provides consulting services, collected more than $500 million on behalf of MassHealth over the past decade.

“It was an appalling scam by a guy who was committed to defrauding an organization,” said Edward Keohane, vice chancellor for communications at UMass Medical School. “It’s unbelievable. The level of it, the depth of it, was staggering.”

So far, one Commonwealth Medicine supervisor has been dismissed while several other workers have been disciplined, and the medical school has called in an outside auditor to figure out what went wrong. Not since employees of former state treasurer Joe Malone allegedly stole $9.4 million in the 1990s has there been such a large alleged theft of public resources by state employees.

But a prominent watchdog said that MassHealth, which provides insurance for the poor and nursing home residents, shares in the blame because it hired Commonwealth Medicine to do its collection work without a competitive bid.

‘It was an appalling scam by a guy who was committed to defrauding an organization.’

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Gregory Sullivan, who served as the state’s inspector general for 10 years until last fall, said one of many debt collection companies might have done a better job of protecting the money.

“A legitimate open competitive bidding process would have protected the public against this kind of theft,” said Sullivan, who has raised concerns about Commonwealth Medicine’s cozy relationship with MassHealth. Four of the top eight leaders at Commonwealth Medicine formerly worked for MassHealth, according to their online biographies.

“A contract like this should have been opened to . . . competitors who could have provided security and double and triple checks against theft,” said Sullivan, now research director at Pioneer Institute, a nonprofit policy think tank.

A person with direct knowledge of Commonwealth Medicine’s collection techniques said the agency’s methods lag behind private asset recovery companies that have moved away from paper checks to electronic payments and meticulously separate the jobs of handling the money and accounting for it.

However, a MassHealth spokesman defended the no-bid contract with Commonwealth Medicine, saying it was an example of cooperation between two parts of state government that is “in accordance with state law.” State officials also say they hope to recover some of the stolen money from Villani’s widow.

And UMass’s Keohane defended the quality of Commonwealth Medicine’s work for MassHealth, stressing that Villani’s case was unique and not a reflection on their management of public money.

“We stand by the financial controls that have enabled us to successfully recover over $500 million in the last decade for the Commonwealth,” he said.

By all accounts, Villani was a beloved employee, and there was an outpouring of affection from co-workers after he died in January from injuries suffered several days earlier in an accident in Woonsocket, R.I., in which he was cited for driving under the influence. He was 54. They remembered his singing and laughing in the office, his fondness for animals, his interest in their children.

“He was the kind of person you could never forget, and every thought of him put a smile on my face,” wrote former UMass Medical employee Pamela Shrimpton in an online condolence book.

But one employee also said that Villani was acutely aware that others at Commonwealth Medicine, essentially a consulting business within the medical school, were taking home large salaries — the chief executive earned $590,320 in 2012. This employee said Villani once referred to top people in his office as “poverty pimps,” profiting from acting as the statewide collection agent for MassHealth.

Villani, who had cut back to part-time work just before his death because of health problems, allegedly devised a simple scheme that apparently was invisible to his co-workers and his family.

He worked for a part of Commonwealth Medicine called the Commonwealth of Massachusetts Estate Recovery Unit, which seeks money from the estates of people who were eligible for Medicaid for expenses such as nursing home care, but had assets — such as a home — that could be liquidated after their death to reimburse the state.

Villani’s group collected these checks, which were supposed to be made out to “Massachusetts Estate Recovery Unit,” and deposited them in a state bank account. But investigators found that Villani deposited many of the checks into the account of a deceptively-named dummy corporation he had created called “Massachusetts Estate Recovery Systems.”

Because many of the check writers abbreviated the name of Villani’s office to “Massachusetts Estate Recovery,” Villani did not have to alter the front of the check in order to deposit the money into his fraudulent account, investigators found.

Over five years, Villani diverted between 75 and 95 checks into his own account, many of them allegedly stolen in the year just before his death, investigators said.

Villani allegedly then made the theft even more difficult to detect by altering computer records, erasing the numbers of the checks he diverted and replacing them with the numbers from old, but legitimate checks that had long since cleared.

It is unclear whether anyone even had an inkling of Villani’s scheme when he ran off the road and into a tree on Dec. 28, 2012.

His conspicuous spending — he also owned a Mercedes, a fully restored 1957 Chevy pickup, Harley-Davidson motorcycles, a Rolex watch, and visited Egypt, Alaska, the Bahamas — likely would have raised red flags at work, but the elaborate cover story Villani told about his inheritance seemed only to add to his popularity.

Villani told co-workers that a wealthy relative had left him property in California and Italy, making him a wealthy man, but he came to work every day because he wanted to. “He doesn’t need a job, but this guy loves being around us,” said one person briefed on the investigation. “He would go to group cookouts and lunches.”

Acting on a tip from one of Villani’s co-workers, the university launched an internal audit within a month after his death and, by February, the school had notified MassHealth, the Worcester County district attorney, and Attorney General Martha Coakley, medical school officials say.

“There is a very comprehensive and very robust audit that kicked into gear within 24 hours of us realizing that something was askew,” said Keohane. “The audit launched right away.”

Coakley’s office is now investigating, though with Villani’s death, it appears unlikely any criminal charges will be brought.

Separately, school officials have been in negotiations with Villani’s widow, Julie, and they believe he squirreled away enough money and assets for the state to recoup its losses. If not, officials say, they will consider suing to recover the funds.

His house, a 4,000-square-foot modern victorian in Uxbridge, has an assessed value of nearly $600,000 — almost triple the average home sale price in the town — and appears to be free of mortgages, according to public records.

Neither Julie Villani nor her attorney returned calls seeking comment.

Though Villani worked for Commonwealth Medicine for 12 years, UMass’s internal audit found no evidence that he diverted checks during the first seven years. However, investigators found that Villani began stealing more in the final year of his life when he was beset by medical problems as well as alcohol issues.

Keohane acknowledged that there are lingering questions about the theft and that, even though Villani’s scheme was unique, Commonwealth Medicine has improved its oversight of employees to prevent a repeat. But, he insisted, “we’ve learned from that and we have taken immediate and aggressive action to insure that any such abuse could not happen in the future.”

Mike Bello of the Globe staff contributed to this report. Andrea Estes can be reached at andrea.estes@globe.com.
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