Ex-Sussex Democratic chief charged with embezzlement
Cart, two others accused of theft from his union
Star Ledger
February 24, 2005
By Jim Lockwood
A federal grand jury yesterday indicted Sussex County's former Democratic chairman and two others on charges of embezzling $284,000 from a union that he formed and its now bankrupt health fund, authorities said.
Charles W. Cart, 56, of Hampton Township, CEO of Health Choice Inc. in Newton, was charged with conspiring to embezzle funds from Local 16 of the United Service Workers of America in Newton and its health fund, according to U.S. Attorney Chris Christie.
Cart's stepfather, Charles H. Wiener, 68, of New Port Richey, Fla., and Marvin Raphael, 63, of Boca Raton, Fla., also were named in the five-count indictment handed up in Newark, Christie said.
According to prosecutors, between May 2000 and November 2001, Cart fraudulently increased the per-member administration fee union workers paid to Health Choice, which processed the union's health claims, prosecutors said.
These increased payments were diverted to Wiener and another Cart family member who was not identified in the indictment, according to the indictment.
"On the one hand, this defendant led people to believe he was on their side as a labor organizer," Christie said. "Yet, as we allege, he then turned them into victims by embezzling from them, their union and their health fund."
Cart and Wiener also are charged with money laundering and mail-fraud conspiracy for trying to deprive the union of legitimate services from Susan Donato, a former union president.
Penalties per charge range from five to 20 years in prison and fines from $250,000 to $500,000.
Cart's attorney Alfred DeCotiis said Cart "is confident that at the end of all the evidence he will be acquitted of all the charges." He said Cart was out of the area and unavailable for comment, but planned to surrender for an initial court appearance.
Raphael, a former friend and business associate of Cart, declared his innocence during an interview yesterday from his home in Florida.
"This is nonsense," he said. "I've never been arrested in my life. I've never been in jail in my life. I don't know if (the charges) are trumped up, but I certainly didn't do what they said."
Donato, 47, of St. Cloud, Fla., who also administrated the health fund, pleaded guilty in January to conspiracy to embezzle from the fund and is currently cooperating in the government's investigation, authorities said.
Cart founded Local 16 in 1993 and was its former president until 1996, when he left to create Health Choice, a third-party health benefits administrator, Christie said.
In April 1998, the union hired Health Choice to administer its self-insured health plan, which provided health insurance for thousands of service workers in New Jersey, New York, Florida and several other states.
Between May 2000 and November 2001, prosecutors said Cart caused $144,000 in checks to be sent from Health Choice to another company, identified as Company-1 in the indictment. The money was sent under the guise of paying fees incurred by Company-1 on behalf of Local 16.
Instead, Company-1 was Cart's conduit to get the money to Wiener, prosecutors said.
Cart also conspired with Wiener and Raphael to defraud the union of $84,000 by creating a union consulting position for Raphael that actually was a no-show job, prosecutors said.
Between August 2000 and July 2001, Raphael received monthly consulting payments of $7,000, and redirected $56,000 to Cart directly or through Cart's horse farm, Horsearound Stables, authorities said.
In late 2000, the health plan started having trouble paying off on health insurance claims and in November 2001 it filed for bankruptcy, with $12 million in unpaid medical claims.
At that time, Health Choice was the administrator for about 50 other self-insured health plans for municipal and county governments and for unions in New Jersey. Former Gov. Jim Florio served on its board of directors. Today, the firm's Web site lists former state Sen. Louis Kosco as a director.
Cart served as Sussex Democratic chairman in 1987-88 and again from 1995 until Nov. 5, 2004, when he stepped down and said in a statement he was no longer able to devote his full time and energy to the post.
Fellow Democrat Howard Burrellv cited the growth of Health Choice in Florida and Washington, D.C. as the reason for Cart stepping down, and that Cart "had his own private plane now and is out of the state a lot."
Burrell, who is Cart's successor as party chair, said he did not know about the Cart investigation until yesterday's indictment.
"I was literally shocked. My mouth almost dropped open," Burrell said. "I had never even had a whiff of this. I knew him as chairman and not anything about his personal business. We've got people who are in politics who are just human beings and do all different kinds of things."
Last year, Cart was subpoenaed by a federal grand jury investigating the billboard-development controversy that has dogged former Gov. James E. McGreevey and his former top aides since 2002.
Cart's Health Choice was among 14 companies regulated by the state that agreed to advertise on a billboard being constructed by McGreevey's top aides as they were about to enter state government. Cart agreed to advertise on a billboard along Routes 1&9 in Newark for an undisclosed sum.
Advertising contracts like Cart's were used by Gary Taffet, McGreevey's first chief of staff, and Paul Levinsohn, McGreevey's first chief counsel, to net higher prices when they sold the billboards just before McGreevey was sworn in.
Staff writers Amanda Gerut, John Martin and Josh Margolin contributed to this report. Jim Lockwood can be reached at jlockwood@star ledger.com or (973) 383-0516.
