Local resident, community supporter and self-starter plans to plea to charges of fraud

Matthew Merritt, Jr., 81, former Lenox Republican town chair, local contributor to the Lenox Library and former head of Valleyhead School, seemed to have it all.

Mr. Merritt, during his days as executive at Valleyhead, was charismatic, suave and debonair in manner and in person.

He always had a knack for the unusual – the bright lights. The classic man dressed in part to be celebrated, with a flair for the “goods” that come as a community investor/leader.

Mr. Merritt once said these residential schools in The Berkshires are at the top of the lists for industry, noting employment and other contributions to each community.

When the press release came in over the wire: “The United States and the State of Vermont Enter into Global Resolution with Former Officers of Bennington School Inc. Relating to Tax and Health Care Fraud Violations,” the value of a large restitution and settlement along with imprisonment of not more than 24 months for a community leader rang throughout The Berkshires.

Not until the feds started an inquiry last year, did Mr. Merritt agree to a plea deal, along with his son, son-in-law and Vermont’s Bennington School Inc. executive director.

Planning to plead guilty to a federal charge of engaging in a scheme to defraud a health care program. are:

-Mr. Merritt of 55 Maple Hill Rd. in West Stockbridge, who has repaid $2.6 million, according to published reports.

– His son, Matthew Merritt, III, 54, of 467 Under Mountain Rd. in Lenox, Bennington School Inc. (BSI) plant manager, will admit to tax fraud and is expected to pay $200,000. He will serve an 18-month sentence.

-His son-in-law, Raymond Crowley, 58, of 229 Long Pond Rd. in Great Barrington, who served as CFO of BSI, will plea to one count of federal tax fraud. It is not clear as to the amount of restitution Mr. Crowley will pay. He, too, will serve an 18-month sentence.

The three Merritt family members have agreed to pay a total of $3 million.

Jeffrey LaBonte, age 59, the executive director of BSI, will pay $1.3 million to resolve his potential civil health care fraud liability. His imprisonment noting his cooperation during the investigation has not been announced.

The senior Mr. Merritt always has had a case of style, whether he was before a committee, advocating for change in the residential school arena or just plain politics.

I ended up at various restaurants he frequented, and he always had a good table, was the so-called man of the hour and the service people seemed to go out of their way to ensure he was satisfied and willing to return.

Last week, he was in federal court in Burlington, Vt., about ready to plea to the government’s charge of fraud, but like the colorful and dynamic Mr. Merritt – he was not going easy or just walking in to plea guilty.

He wanted a deal.

Federal Prosecutor Timothy C. Doherty, Jr., said the case was continued to June 12 at 9:30 a.m.  in Federal District Court in Burlington for a competency hearing.

The original date for his plea was May 9.

Atty. Doherty said he could not comment on the facts in the case beyond a press release from the Federal Bureau of Investigation (FBI) Albany bureau.

His attorney, David V. Kirby of O’Connor and Kirby in Burlington, asked for a continuance, noting there may be an issue of incompetence.

From this view, it looks like there was no issue on the settlement amount of  $2.6 million out of $4.3 million fraud case. It seems like Mr. Merritt’s attorney was working on getting the 24-month jail term to one of the more luxurious federal penitentiaries.

Atty. Doherty said he could not comment, as this is a pending case.

As to local speculation that the Merritt family may have done the same thing at Valleyhead, again Atty. Doherty would not comment.

The girls sent to Valleyhead paid $150,000-plus per year. This is far more than it costs to house state prisoners – $30,000.

Meanwhile, U.S. District Court Judge William K. Sessions III agreed to the continuance or a psychiatric evaluation.

The plea agreement is designed to settle both criminal and civil cases involving the four men, the press release said.

Yet, it is inconceivable that this team would not have done the same at Valleyhead over the years.

As one local questioned: “How do we know that this same fraud was not going on on Reservoir Road? We don’t and thus, this just may be the tip of the iceberg!”

Until 2013, BSI, a for-profit, closely-held corporation, operated a residential program in Bennington that offered therapeutic and educational services for socially and emotionally challenged boys and girls, the U.S. Attorney’s Office said.

It said, over the course of the last two decades, the State of Vermont placed many students at BSI and was responsible for their tuition and other expenses.

The funding for these placements came from the Vermont Medicaid program (approximately 60 percent federal funding and 40 percent state funding) and from several Vermont state agencies, including the Agency of Education, the Department of Mental Health and the Department for Children and Families.

The funding was based on a per diem rate for each student, determined on an annual basis by the Division of Rate Setting (DRS) within the Vermont Agency of Human Services.

The annual rate set by DRS was determined upon a review of BSI’s application materials, including various accounting reports and budgets.

In particular, the formula for the rate calculated by DRS for Medicaid and education payments to BSI was based upon the school’s reported allowable expenses. The higher the allowed expenses, the higher the per diem rate for each student.

However, not all of BSI’s claimed allowable expenses were in fact allowable for the rate calculation.

Prosecutors noted, “Matthew Merritt Jr. as president and LaBonte as executive director, with the assistance of Crowley, as CFO and Merritt III, as plant manager, implemented a system of compensating certain employees of BSI, in addition to their salary amounts, by providing personal benefits, such as cars, gasoline, oil for personal residences, payments of personal expenses on credit card accounts, salaries for family members who did not work at BSI and reimbursements for various personal expenses.”

Those compensations were never reported on the individuals’ tax returns, according to the release.

The investigation began in 2011 after a request by BSI for a rate change due to reduced enrollment.

A different company is now operating the Bennington School, according to the press release.

Posted by George C. Jordan III on May 23, 2013. Filed under Opinion,View from the Tower. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry