Oregon Department of Justice

Attorney General Ellen F. Rosenblum

Oregon Department of Justice - Attorney General Ellen F. Rosenblum
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April 25, 2005

Oregon Attorney General Hardy Myers today announced the sentencing of Diane Stacy, a registered nurse, and her husband Kenneth Stacy, a special education teacher, on multiple felony convictions, resulting from a $240,253 health care billing fraud scheme. The sentencing took place on April 18, 2005 in Multnomah County Circuit Court.

The Stacys are the adoptive parents of a medically fragile child who requires intensive in-home nursing care. The Stacys had private insurance coverage through Regence Blue Cross Blue Shield ("RBCBS"), and coverage extended to their adoptive daughter. RBCBS allowed the Stacys to hire nurses to care for their daughter in the home, and RBCBS would pay the nurses up to the policy cap. These nurses, along with the Stacys, were to fill out timesheets to submit to RBCBS for payment. The RBCBS reimbursement checks would then be made out to both the nurse and one of the Stacys, and sent to the Stacy's home.

In 1999, the Stacys embarked on a billing fraud scheme that required a second set of books, forged weekly nursing notes, and timesheets, which went undetected through mid-2003. In essence, the Stacys would forge nurses' signatures on the timesheets, claiming significantly more hours than were actually worked by the nurses, and submit these falsified documents to RBCBS. The Stacys would receive and deposit the RBCBS reimbursement checks in their personal bank account, and then write personal checks to the individual nurses for the actual number of hours worked by each nurse, pocketing the difference. The State of Oregon estimates the Stacys billed for over 10,000 hours (at a rate of $22-$27/hour) never worked by nurses. When the Stacys exhausted RBCBS yearly cap limits, Medicaid funds were used to supplement and pay for the billed nursing care. The profit from the fraud scheme was kept and used by the Stacys for such things as the purchase of a new home, private education for the Stacys' three other children, and Volvos for the other children upon their 16th birthday.

The Stacys each pled guilty to five counts of Aggravated Theft and two counts of Forgery in the First Degree. After hearing arguments, in which the need to impose a significant sentence due to the planned, deliberate and brazen nature of the fraud scheme, conflicted with concerns over the required continued care for the Stacys' now 21-year-old disabled daughter, Multnomah County Circuit Court Judge Michael Marcus imposed sentence. Kenneth Stacy was sentenced to a total of five years probation, with 13 months being served in jail under work release. Diane Stacy was sentenced to a total of five years probation, with 13 months being served under house arrest, so that she could continue to provide quality in-home care for the disabled 21-year-old daughter.

As part of their sentences, the Stacys are jointly liable to pay the Oregon Health Plan $35,948, and RBCBS $201,545 in restitution, as a result of the damages sustained due to the fraudulent billing scheme.

The case was investigated by the Oregon Department of Justice Medicaid Fraud Unit, and prosecuted by the Unit through the Multnomah County District Attorney's Office.


Senior Assistant Attorney General Rodney Hopkinson |
Atty. in Charge Ellyn Sternfield, Medicaid Fraud Unit, (503) 229-5725 |
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