Insurance broker embezzles $6M in client funds
Ben-E-Lect president Mark Merrill Reynolds pleads guilty to using client holding fund for his business, personal finances
FRESNO — A Visalia health insurance broker faces up to five years in prison for embezzling more than $6 million client funds to pay his business and personal expenses.
On May 9, U.S. Attorney McGregor Scott announced Mark Merrill Reynolds, 62, of Fresno, pleaded guilty to unlawfully using client funds held by his company, Ben-E-Lect, for his company’s expenses and his own personal finances over a five-year period.
According to court documents, Reynolds was the president and sole shareholder of Ben E-Lect and Ben-E-Lect of Visalia. These companies operated in Fresno and Tulare Counties. Ben-E-Lect’s clients were small to medium sized businesses that purchased high deductible, fully insured group medical plans from independent insurance carriers, and then self insured beneficiaries for amounts up to the amount of the high deductible. Ben-E-Lect processed the claims using funds that its clients paid into an account known as the Ben-E-Lect Employer Elect account. Ben-E-Lect was required to hold these funds only withdrawing them for specific purposes, none of which included Ben-E-Lect’s own operational expenses or Reynold’s personal gain.
According to the plea agreement, Reynolds embezzled funds from the Employer Elect account to his own use by withdrawing funds from the account and then using these funds for business operational expenses, his personal mortgage payments, personal vehicle loan payments, personal credit card payments, the purchase of a 30 percent interest in a payroll company, deposits into a personal investment account, and cash withdrawals.
Reynolds was indicted by a federal grand jury on 20 counts of embezzlement, mail fraud, and money laundering in 2016. The indictment alleged that Reynolds embezzled approximately $6,089,500 from the Ben-E-Lect Employer Elect account, but reimbursed that account approximately $1,613,500, netting a loss of approximately $4,476,000. All the funds diverted from the Ben-E-Lect Employer Elect account were allegedly first moved into different accounts to conceal their source before being used and spent. During the time period alleged in the indictment, Ben-E-Lect serviced over 3,200 clients across 22 states.
Reynolds is scheduled to be sentenced by Judge Lawrence J. O’Neill at 10:45 a.m. on Aug. 20 in U.S. District Court Eastern District of California. Reynolds faces a maximum statutory penalty of 5 years in prison and a $250,000 fine. The actual sentence, however, will be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines, which take into account a number of variables.
This case is the product of an investigation by the Federal Bureau of Investigation and the California Department of Insurance. Assistant U.S. Attorneys Mark J. McKeon and Henry Z. Carbajal III are prosecuting the case.