Attorney Sentenced for Fraud Conspiracy That Stole $1.2 Million from St. Luke’s
KANSAS CITY, Mo. – Tom Larson, Acting United States Attorney for the Western District of Missouri, announced that a Lake Lotawana, Mo., attorney was sentenced in federal court today for his role in a fraud conspiracy in which he and his former law partner stole more than $1.2 million from St. Luke’s Health System, a client of their former law firm.
Mark J. Schultz, 57, of Lake Lotawana, was sentenced by U.S. District Judge Beth Phillips to one year and one day in federal prison without parole. The court also ordered Schultz to pay $400,500 in restitution to St. Luke’s.
On Feb. 10, 2017, Schultz pleaded guilty to participating in a wire fraud and mail fraud conspiracy. His former law partner, Alan B. Gallas, 65, of Kansas City, Mo., also pleaded guilty in a separate but related case and was sentenced to one year and one day in federal prison without parole. The court also ordered Gallas to pay $1,224,264 in restitution to St. Luke’s.
Schultz and Gallas were attorneys and partners in the law firm of Gallas & Shultz in Kansas City, Mo., which specialized in collection work for corporations. Schultz and Gallas have each surrendered his license to practice law.
Gallas admitted that he engaged in a scheme from 2009 through July 2015 to defraud a client, St. Luke’s Health System, of monies collected by his law firm totaling $1,224,264. Schultz admitted that he participated in the conspiracy from January 2014 through July 2015.
Gallas was the attorney responsible for the St. Luke’s account at the law firm. After attempting to collect on patient accounts for a period of time, St. Luke’s would transfer its larger outstanding patient accounts to Gallas & Shultz for collection. As payments on patient accounts were received, the payments were logged into the case management system for the appropriate patient account. The monies were then deposited into the law firm’s trust account. On a periodic basis, often monthly, the firm would remit the patient payments collected to St. Luke’s.
Gallas admitted that he caused personnel at the law firm to withhold money from payments made to St. Luke’s by placing thousands of payments on “hold” status, then directing those funds be transferred from the trust account to the firm’s operating account. The pattern of not remitting some payments to St. Luke’s escalated significantly from 2012 to 2015. According to court documents, the firm withheld 601 payments totaling $211,391 in 2012. The firm withheld 699 payments totaling $266,696 in 2013. The firm withheld 625 payments totaling $227,892 in 2014. Through the month of July 2015, the firm withheld 625 payments totaling $216,845.
Schultz admitted that he agreed with Gallas and others to transfer funds from the trust account into the law firm’s operating account. According to court documents, Schultz was informed by his office manager in January 2014 that she was going to quit because she could no longer agree to move money out of the trust account. Schultz nevertheless continued to profit from the diversion of funds from the trust account until the discovery of the scheme in July 2015.
These cases were prosecuted by Assistant U.S. Attorney Paul S. Becker. They were investigated by the FBI.