Powerful MS Coast couple is hiding assets to avoid paying $32.6M for fraud, government says

Mississippi Coast business couple Ted and Julie Cain are trying to avoid paying a $32.6 million civil judgment against him for defrauding Medicare, the U.S. Attorney’s Office alleges in a lawsuit filed to collect the money.

Julie Cain is liable for repayment of $27.4 million of the total owed for her part in the fraud. The jury found that the couple billed Medicare over a 12-year period for work they never did at the former Stone County hospital, which Ted Cain owns and now leases to Gulfport Memorial Hospital.

The Cains had not paid a dime on the judgment by November 2022, government filings show. They are appealing the jury’s verdict in the civil case tried in U.S. District Court in Gulfport.

Attorneys for the government say the Cains tried to conceal their assets six months before their trial started because they were “staring down the barrel of a multi-million judgment.”

Before the trial, they transferred most of their assets to two trusts set up for their children, a son and daughter. Records show the Cains transferred 25 companies to the trusts, including LLCs that hold property. But Ted Cain controls those trusts through a management company, the government says.

“Hence, by the stroke of a pen, Ted Cain — who minutes prior was the owner of dozens of LLCs and real properties — became almost penniless,” the government said in a legal filing.

The government is asking the judge presiding over the case, Henry T. Wingate, to find that the transfer of assets was fraudulent, or assess damages against the trusts and its holdings. The government also wants to investigate the financial status of the Cains and the trusts.

The government’s ultimate goal is to collect the money the Cains owe and to prevent the Cains from drawing down assets from the trusts.

Wingate froze the couple’s assets before the civil case was decided. Ted Cain denies in legal filings that the assets transferred belong to him.

The Cains, represented by former Gov. Ronnie Musgrove, say they transferred the assets to the trusts “for legitimate estate planning purposes” and no fraud was involved. They also say that they are able to pay the judgment against them, despite the transfer of assets.

The fight over the assets is set for trial in March 2024 before Wingate in federal court. The Cains, their childrens’ trusts and companies and property held by either the elder Cains or the trusts, are defendants in the case.

Cain assets: from Biloxi to Hattiesburg

Cain bought Stone County Hospital in 2001, after it had closed three times. He testified during the trial that the 25-bed hospital would not have been successful and residents would have been without an emergency room had he not overseen its operation.

He paid himself more than $15 million for the oversight from 2004-2013 and his wife $2.3 million as hospital administrator. But testimony during the trial showed they did little work for the money, with the government insurance program Medicare reimbursing them $13 million of the total.

Government attorneys said in a legal filing: “Ted Cain’s ‘work’ failed to meet every single condition of payment and evidence at trial established that Ted Cain’s visits to the hospital were to the cafeteria for the fried chicken and catfish on Wednesdays and Fridays, respectively.”

The jury found the Cains collected more than $10 million of their salaries through fraud. Judge Wingate then tripled the damages, as the law requires.

As a young man, Cain, who was born and raised in Wiggins, followed his father into the nursing home business. He soon branched out, becoming the owner of companies such as The Focus Group advertising agency in Biloxi, Cain Cattle Co. in Perkinston and Quest Pharmacy in Hattiesburg.

He also owns multiple properties, including a waterfront home in Ocean Springs.

His companies, with the exception of Stone County Hospital and Corporate Management Inc. in Gulfport, were transferred to his children’s trust. Both the hospital and CMI were also defendants found liable in the Medicare fraud case.

Medicare fraud under appeal

The Cains appealed the fraud verdict on multiple grounds to the 5th U.S. Circuit Court of Appeals.

They say the government bypassed Medicare’s administrative process for recovery of overpayments. Taking the Cains to court allowed the government to recover damages that tripled the overpayment.

They also say the government failed to prove the Cains “knowingly” submitted false claims because their hospital salaries were reported annually to the government.

Government attorneys argue the verdict should stand.

They say Ted Cain accomplished his fraud through a “sweetheart contract” between Stone County Hospital and Corporate Management Inc.

CMI charged the hospital “exorbitant” management fees to disguise the size of Ted Cain’s executive compensation at Stone County Hospital, which was 15 times the average, the government attorneys contend.

They also say Medicare was billed for “hundreds of hours” that Julie Cain did not work, first as hospital administrator, then as a consultant and director.

The Cains’ Medicare fraud appeal is still pending.

Leasing to Memorial Hospital

Through legal filings in the assets case, the government has tried to establish a pattern of concealment on the Cains’ part.

When he leased the hospital building to Memorial in late 2019, Ted Cain did not disclose the Medicare fraud lawsuit pending against him, his wife and the hospital. The government says the lease terms required disclosure of pending litigation.

Cain also identified himself as the owner of Wiggins Acute Care, his company that owned the hospital building and would be leasing it to Memorial.

But Wiggins Acute Care was one of the companies transferred to the Cain childrens’ trusts created months earlier.

In its initial lease with Wiggins Acute Care, Memorial agreed to rent Stone County Hospital, now Memorial Hospital Stone County, for $129,000 per month. Fourteen days after the lease was signed, the Cains finalized paperwork that created the trusts months earlier, further indicating their attempts to hide assets, government lawyers say.

Cain paid himself the difference between Gulfport Memorial’s rent payment and the monthly mortgage of $94,503.37 that Wiggins Acute Care owed on the hospital, government attorneys say.

In addition to Cain’s own spending, government attorneys are also concerned because, they say, his children have access to, or are benefiting from, the appreciation of assets in the trust funds.