13 Investigates: Bosses caught embezzling employee money

Tri county

Update 2/5/2015: Tri-County’s CEO Kim Hamstra was fired from the company following KRQE News 13’s investigation. The company has selected Zach Cordova, an employee on the advisory board, to be the interim CEO.

TAOS, N.M. (KRQE) – Something is wrong in Taos and the focus is on a northern New Mexico healthcare facility.

“We just couldn’t believe it,” a former employee said. “We were lied to.”

Among the 80 employees who work at Tri-County Community Services, there are some tears, some are angry and others are devastated.

Tri-County has been providing mental health and substance abuse counseling to clients throughout Taos, Colfax and Union Counties for 35 years. The non-profit healthcare agency is funded by private insurance, Medicare and Medicaid. However, last year Tri-County ran into financial difficulty.

“Payment was very very slow,” Tri-County CEO, Kim Hamstra, said. “We were late on payrolls pretty much January and I think to the middle of March…So what happened is that the money we would normally be making, that dropped. And we were no longer able to pay all our bills.”

According to a News 13 investigation, in a desperate move to avoid closing its doors, Tri-County secretly borrowed money from its employees.

A portion of each employee’s paycheck was supposed to go to Blue Cross Blue Shield for health insurance. Instead of turning the money over to Blue Cross, Tri-County seized the employee insurance premiums and used the money to make payroll.

John Franchini, the state’s Superintendent of Insurance, said it is a violation of New Mexico’s rules and statutes.

“It’s not their money. It’s their employee’s money to protect them.” Franchini said.

Tri-County’s Board of Directors authorized the decision to use employee health insurance money for payroll, according to the Chairman, Larry Mapes.

Attorney General Hector Balderas says Tri-County cannot borrow money earned by the employee. Tri-County is required to separate those funds out and invest in benefits as required by state law.

Because Tri-County failed to pay the premiums for the group health policy, Blue Cross cancelled it for non-payment. Even though employees no longer had health insurance, the health care agency continued to deduct the premiums from their paychecks anyway. Over the course of five months, Tri-County hit up its employees some $33,000 for non-existent health insurance.

“Tri-County has taken health insurance premiums out of every single pay check until December.” Tri-County caseworker, Susan Warner said.

When Warner had major surgery last year, she thought she had insurance.

“I had total bi-lateral knee replacement. Both of my knees replaced at the same time,” Warner said. “All medical services that I have had have all been authorized by Blue Cross Blue Shield.”

Three months later when she returned to work, Warner was not prepared for the shock of her life. She found out that she was responsible for all of the medical expenses.

“I don’t know, $200,000? The hospital (bill) I know is around $70,000,” Warner said. “I can’t pay it. I don’t have any money to pay this.”

A former employee said that she quit her job after Tri-County diverted her insurance payments.

“I don’t even have words for it,” the former employee said. “These are people we trusted with our money. What a shock.”

It wasn’t just health insurance. Employee life insurance through AIG is also in jeopardy.

Tri-County caseworker Bonnie Allen said money for premiums was not going to the life insurance company.

“Theres not a whole lot of explaining to do. It was a huge huge error. It was a huge misrepresentation,” Hamstra said.” We’ve written letters letting them know what happened and it doesn’t make it right Larry. It doesn’t.”

Board Chair Larry Mapes agrees that Tri-County took money that didn’t belong to them.

“Ultimately I guess that’s how it would have to be interpreted. We did not interpret it at the time like that because we felt that we could make payroll and make insurance.” Mapes said.

Attorney General Balderas says that sets up a whole host of problems.

“There could be criminal prosecutions, civil penalties, but ultimately theres a breach of trust because the law is intended to protect those funds.” Balderas said.

The Insurance Superintendent has now launched an investigation.

“When you do health insurance, someone could have a catastrophic incident that could cost hundreds of thousands of dollars. And its very important that coverage that was intended and paid for is still in place when that occurs.” Franchini said.

Warner understands that first hand.

“I should not have to deal with this mental stress of, am I stuck with $200,000 in medical bills?” Warner said. “They’re responsible for my medical bills and they better pay them.”

Mapes says he is sorry for the employees who were stuck with huge medical bills.

“I apologize … We will make good on it. We have to.” Mapes said.

Blue Cross Blue Shield tells KRQE News 13, Tri-County has now paid the group health insurance premiums it owed for July, August and September last year. As a result, Blue Cross Blue Shield will pay employee’s pending medical claims for that period. The insurance company says it is working with Tri-County to resolve employee’s unpaid medical claims from October and November 2014.

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