Former Rhode Island House Majority Leader Gerard M. Martineau pleaded guilty today to public corruption charges, admitting that he arranged personal business dealings with a pharmacy company and a health insurer, and then steered the outcome of legislation in which those companies were interested.  The companies paid Martineau nearly $900,000 for paper and plastic bags to be used in pharmacy retailing.

        United States Attorney Robert Clark Corrente and Assistant Attorney General Alice S. Fisher of the Criminal Division announced the guilty plea, which Martineau entered today before Chief U.S. District Court Judge Mary M. Lisi in U.S. District Court, Providence.

Upland Group

        At the plea hearing, Assistant U.S. Attorney Gerard B. Sullivan said the government could prove that Martineau, operating as the Upland Group, arranged to sell paper prescription bags to the health insurance company for use as promotional items, and both plastic and paper bags to the pharmacy company for use in its merchandising.  He then used his position to affect the fate of legislation on the companies’ agendas.

Pharmacy Freedom of Choice

        The health insurance company and the pharmacy both opposed so called Pharmacy Freedom of Choice legislation, which would have opened to other pharmacies a closed prescription network that the two companies controlled.  Until 1999, Martineau was in favor of Pharmacy Freedom of Choice.  However, after the Upland Group started selling bags to the health insurer and the pharmacy, Martineau announced that he’d changed his opinion on the legislation.  He subsequently used his position as Majority Leader to stymie its passage.

        Between 1999 and the end of the 2002 session, when he left the General Assembly, Martineau also worked for or against other legislation on the agendas of the health insurer and the pharmacy.

Health Insurance Company

        Beginning in 1999, Martineau, through the Upland Group, periodically billed the health insurance company for paper bags in lots of one and three million, at $19,500 per million.  On some occasions – in December 1998, December 2000, and in December 2001, he billed the company just days or weeks before the start of a legislative session. 

        In all, Martineau billed the health insurance company $195,000 for ten million bags.  However, fewer than two million were ever manufactured.  The health insurer paid him $175,500.  It did not pay the final invoice for $19,500, which Martineau submitted in 2003, after he had left the General Assembly.

Pharmacy

        Prior to 1999, Martineau had a long-standing business relationship with the pharmacy, selling commodities to it for commission.  After he formed the Upland Group, he arranged the sale of both plastic and paper bags to the company, and between 1999 and the end of 2002, he received a total of $716,435 in commission payments for bags sold to the pharmacy.

        Assistant U.S. Attorney Sullivan said that Martineau never disclosed to Rhode Island citizens his conflicts of interest with the pharmacy and the health insurer.  Martineau even took steps to conceal the business relationships – using such devices as not signing his name to invoices and falsely signing the name of another person in correspondence with the health insurer. 

        Martineau pleaded guilty to two counts of honest services mail fraud – using the mail to deprive Rhode Island citizens of their right to his honest services.  He is free on unsecured bond, pending sentencing, which Judge Lisi scheduled for February 22.

        The charges against Martineau resulted from a continuing public corruption investigation by the Federal Bureau of Investigation, other federal agencies, and the Rhode Island State Police into relationships between Rhode Island legislators and entities with legislative agendas.

        In addition to Assistant U.S. Attorney Sullivan, Assistant U.S. Attorney Stephen G. Dambruch and Trial Attorneys Daniel A. Petalas and Peter C. Sprung of the Department of Justice Public Integrity Section are prosecuting the case.