Former U.S. Navy officer sentenced for $2 million insurance fraud scheme

By SDCN Editor

San Diego, CA–A former U.S. Navy chief petty officer was sentenced Tuesday in federal court to 30 months in prison after admitting that he and others defrauded an insurance program meant to compensate service members who suffer serious and debilitating injuries while on active duty.

Christopher Toups, 40 of White, Georgia pled guilty to conspiracy to commit wire fraud, federal prosecutors said.

According to Toups’ plea agreement, participants in the scheme obtained approximately $2 million in payments from fraudulent claims submitted to the Traumatic Servicemembers Group Life Insurance Program, and Toups personally obtained about $400,000. The insurance program was funded by service members and the Department of the Navy.

Toups admitted that from 2012 to at least December 2015, he conspired with his then-spouse Kelene McGrath, Navy Dr. Michael Villarroel, and others to obtain money from the United States by making claims for life insurance payments based on exaggerated or fake injuries and disabilities.

“Lying and stealing funds meant for injured service members is appalling,” said U.S. Attorney Tara McGrath. “The United States Attorney’s Office is committed to protecting those who serve, and this case is an excellent example of law enforcement collaboration to do just that.”

“Fraudulently filing claims for unearned benefits diverts compensation from deserving service members who suffered serious and debilitating injuries while on active duty,” said Special Agent in Charge Rebeccalynn Staples with the Department of Veterans Affairs Office of Inspector General’s Western Field Office. “This sentence holds the defendant accountable for his egregious actions, and the VA OIG will continue to work tirelessly with our law enforcement partners to ensure schemes like this are uncovered, investigated, and prosecuted to the fullest extent of the law.”

According to the plea agreement, in addition to submitting his own TSGLI claims based on fake injuries and disabilities, Toups encouraged numerous current or former Navy service members to submit claims and sometimes told them to provide medical records to McGrath. McGrath, a nurse, falsified or doctored medical records to exaggerate or fake injuries. Villarroel certified that he reviewed the records and determined activities of daily living were lost or impaired and consistent with the claimed injuries as required for claims to be processed and qualify, at times supporting the determination by falsely stating he interviewed the claimant. Villarroel also, at times, provided others’ medical records for McGrath to use in fabricating claims.

Toups admitted that he encouraged recipients of claim payments to give him part of the money, sometimes characterizing it as a “processing fee.” McGrath and Villarroel received part of the kickback depending on their involvement in the claim. Toups paid Villarroel in cash and by cashier’s check. At times, Toups and others conducted financial transactions in amounts under $10,000 to evade perceived financial reporting requirements.

“Stealing from a program set in place to aid injured and disabled service members divert compensation from deserving individuals,” said FBI San Diego Special Agent in Charge Stacey Moy. “Willingly defrauding the American people, especially those who protect our country, will not be tolerated. The FBI will continue to collaborate with our law enforcement partners to ensure those who commit such acts are held accountable.”

According to court records, Toups and his co-defendants were part of the Explosive Ordinance Disposal Expeditionary Support Unit One, based in Coronado. Toups was a chief petty officer construction mechanic.