United States Justice Department officials say a Loudoun County man pleaded guilty this week to embezzling nearly $8 million that was intended to settle claims by children who alleged they were victims of medical malpractice.
Joseph E. Gargan, 59, of Round Hill, was the CEO of the Pension Company, Inc., an Arlington-based business that would execute settlement agreements entered into between civil litigants, according to court documents. Specifically, the Pension Company was hired to transfer money from civil defendants to plaintiffs and to purchase annuities on behalf of minor plaintiffs.
The federal government entered into settlement agreements with plaintiffs in six separate matters. Each of the cases reportedly involved children who either claimed to be injured as a result of medical malpractice or who suffered the loss of a parent through alleged medical negligence that occurred at a hospital or clinic operated or insured by the federal government. The settlement agreements required the U.S. to pay the plaintiff a sum of money and to purchase an annuity on behalf of the injured child. From December 2015 to August 2019, the U.S. transferred nearly $16 million to the Pension Company to purchase the annuities and execute the six settlement agreements. Gargan embezzled nearly $7 million of those funds, according to the Justice Department.
Gargan also embezzled money from a hospital located in New York that was part of a civil settlement with a minor child, according to prosecutors. The settlement called for, among other things, $3.825 million to be paid by the hospital to a trust to pay for the care and ongoing medical treatment of the child. The settlement agreement also provided that a portion of that money be paid to a structured settlement broker who would then purchase an annuity which would generate future income for the trust. The Pension Company was retained as the structured settlement broker. From October 2018 to March 2020, the hospital paid the Pension Company more than $1.03 million to fund the purchase of an annuity on behalf of the trust. Gargan embezzled all of that money.
In some cases, Gargan attempted to conceal his criminal activity by creating false documents purporting to show that he had purchased the annuities when he had actually embezzled and converted that money to his own use. Gargan also made payments to the plaintiffs falsely claiming the payments were proceeds from an annuity, when, in fact, the payments were made only to conceal his criminal conduct.
Gargan on June 15 pleaded guilty to embezzlement of government funds and wire fraud and faces a maximum penalty of 30 years in prison when sentenced on Sept. 23. Actual sentences for federal crimes are typically less than the maximum penalties.
G. Zachary Terwilliger, U.S. attorney for the Eastern District of Virginia, and James A. Dawson, special agent in charge of the Criminal Division of the FBI Washington Field Office, announced the plea after U.S. District Judge Rossie D. Alston, Jr. accepted it. Assistant U.S. Attorney William Fitzpatrick is prosecuting the case.